From 6 April 2026, significant changes to Business Property Relief (BPR) will come into force, changes that will profoundly affect inheritance tax (IHT) planning for business owners, especially those with family-run enterprises and high-value business assets.

For decades, BPR has been a cornerstone of estate planning, offering up to 100% IHT relief on qualifying business assets. This has allowed business owners to pass wealth through generations without triggering a tax charge on death. However, the new rules will place a cap on this relief, forcing many individuals to rethink how they pass their business interests to successors.

With just under a year before these changes take effect, it is crucial for business owners to take a proactive approach to protect their assets and avoid substantial tax liabilities.

Understanding the Current BPR Rules

Under the current regime, BPR provides 100% relief from inheritance tax on the value of a business or business interest that qualifies. This includes shares in an unquoted trading company, including most family-owned businesses and many shares listed on the Alternative Investment Market (AIM). There is no upper limit to the value of assets that can benefit from this relief.

As a result, many business owners have taken a relatively passive approach to estate planning, relying on the assumption that their business assets will fall outside the scope of IHT.

What’s Changing from April 2026?

The 2026 reform represents a shift in both the scope and generosity of BPR. The key changes are as follows:

  • Introduction of a £1 million cap on the amount of qualifying business and agricultural property that can benefit from 100% BPR.
  • Amounts exceeding the £1 million cap will qualify for 50% relief, meaning a reduced IHT rate of 20% on the excess (as opposed to the standard 40%).
  • The cap is applied per individual or per trust and cannot be transferred between spouses or civil partners. Each person must plan individually to utilise their full allowance.
  • AIM-listed shares, previously eligible for 100% BPR, will only receive 50% relief under the new rules.

These changes present a significant departure from the current estate planning environment. For many family businesses, the value of business assets far exceeds £1 million, meaning a potentially large portion will become partially taxable upon death.

The Implications for Business Owners

The revised BPR framework could result in substantial inheritance tax bills, particularly where the estate is heavily tied up in the business. This is especially problematic in scenarios where there are limited cash reserves available to meet tax liabilities.

In some cases, the business may need to sell assets or generate taxable income to meet the IHT bill, putting strain on operations and liquidity. Without proper planning, families may find themselves forced to part with key parts of the business simply to meet tax obligations.

Given the scope of these reforms, business owners can no longer afford to rely on passive or last-minute estate planning. A proactive, forward-thinking approach is now essential.

Key Planning Actions to Take Before April 2026

If you own business or agricultural assets that currently qualify for BPR, there are several important steps you should consider taking before the changes come into effect.

1. Review and Update Business Asset Valuations

Start by obtaining a clear, up-to-date valuation of your business interests. This will provide a foundation for understanding how much of your estate will be impacted under the new rules.

2. Identify Qualifying Assets

Determine which business assets currently qualify for BPR and consider how this may change under the 2026 rules. Some assets, particularly AIM shares, may no longer offer the same tax advantages.

3. Model Your Potential IHT Liability

Calculate the potential tax exposure if no changes are made to your estate plan. This allows you to quantify the risk and determine what level of planning is needed to mitigate the future IHT burden.

4. Consider Gifting Assets into Trust Before the Deadline

One of the most effective planning opportunities is to transfer business assets into trust before 6 April 2026. As long as the transfer occurs before the rules change, the unlimited 100% relief should still apply, provided the settlor survives seven years from the date of transfer.

5. Equalise Ownership Between Spouses

If you’re married or in a civil partnership, consider reorganising share ownership so that both partners hold at least £1 million in qualifying assets. This maximises the use of both individual BPR caps.

6. Spread Ownership Across the Family

Extending ownership to adult children or other family members can help spread the benefit of individual £1 million allowances across multiple estates.

7. Create New Share Classes

Introducing new share classes allows you to transfer future growth to the next generation while retaining control. This technique can support both succession planning and tax efficiency.

8. Review and Update Your Will

Your Will should be reviewed to ensure it takes full advantage of the revised BPR allowances. A poorly drafted Will may inadvertently waste part or all of the £1 million cap on first death.

9. Plan for IHT Liquidity

Ensure there is a strategy in place to fund any potential IHT liability. Options include life insurance policies, staged share buybacks, or maintaining sufficient cash reserves in the business or estate.

Next Steps: Take Action Now to Protect Your Business and Legacy

The BPR changes scheduled for April 2026 will fundamentally alter the inheritance tax landscape for business owners. Without appropriate planning, families may face large tax bills that could disrupt the continuity and stability of the business.

Now is the time to review your estate planning strategy and ensure that your business and family are protected. These are complex changes, and careful, professional advice is essential.

At Williamson & Croft, our expert advisors can help you:

  • Assess the impact of the new BPR cap on your estate
  • Explore gifting and trust planning opportunities before the deadline
  • Structure ownership and succession plans for maximum tax efficiency
  • Ensure your Will and estate documents are aligned with the updated legislation

Contact our business tax advisory team today to arrange a consultation. With the right planning, you can continue to protect and pass on your business to the next generation, without unnecessary tax exposure.