In this article, we explain what Business Property Relief is, how it works following the April 2026 changes, the pitfalls to be aware of and the practical steps you can take to protect your business and your estate.

What is Business Property Relief?

Business Property Relief (BPR), sometimes called Business Relief, is an inheritance tax relief on qualifying business assets.

It was introduced in 1976 to allow family businesses to pass from one generation to the next without being sold or broken up solely to meet an inheritance tax bill.

Until recently, qualifying business assets could attract up to 100% relief, often meaning no inheritance tax was payable. That made BPR a cornerstone of estate and succession planning for business owners.

What are the Business Property Relief qualifying rules?

The new legislation has not changed the conditions for qualifying for relief. broad terms, to qualify for BPR:

• the business must be wholly or mainly trading, rather than mainly holding investments;
• you must generally have owned the asset for at least two years before the transfer;
• there must be no binding contract for sale in place at the time; and
• "excepted assets" such as surplus cash or investments not used in the trade are excluded from relief.

Historically, 100% relief applied to a business, while 50% relief applied to certain other assets, such as land, buildings or machinery used in the business but held personally. While these qualifying rules remain in place, the rate and amount of relief have been reformed.

Business Property Relief changes from 6 April 2026

The reforms, legislated in the Finance Act 2026, took effect for transfers on or after 6 April 2026. The key changes are:

• 100% relief on the combined value of qualifying business and agricultural property is now capped at £2.5 million per person.
• Qualifying value over £2.5 million receives 50% relief , which makes for an effective inheritance tax charge of 20% on the excess.
• Any unused allowance can pass to a surviving spouse or civil partner , so a couple can potentially protect up to £5 million of qualifying assets.
• Shares not listed on a recognised stock exchange, such as AIM shares, now receive only 50% relief and do not benefit from the £2.5 million allowance .
• Lifetime gifts of qualifying property made on or after 30 October 2024 fall within the new rules if the person making the gift dies on or after 6 April 2026 and within seven years of the gift.
• Inheritance tax on qualifying business and agricultural property can be paid in ten equal annual instalments, interest-free .

The allowance is fixed until April 2031, after which it is due to rise in line with inflation.

The Business Property Relief pitfalls owners must avoid

The changes create several pitfalls that are easy to overlook:

• Funding the inheritance tax can be expensive and difficult , especially if the estate holds little cash. Selling assets within the company can trigger a corporation tax charge, while extracting the proceeds as a dividend can trigger income tax.
• A valuation will now be needed when gifting qualifying shares, on certain events within trusts, and on death.
• There is a lifetime gift trade-off to consider . Gifting business assets during your lifetime can save inheritance tax at 20% on value above the allowance. However, it means losing the capital gains tax uplift to market value that would apply if the asset instead passed on death. This is less of a concern if the asset is unlikely ever to be sold.
• There is a seven-year risk on gifted assets . If you gift assets and die within seven years, there could potentially be an inheritance tax charge and the loss of the capital gains tax uplift.
• Out-of-date wills may not be effective . A will drafted under the old rules may no longer achieve what you intend, and should be reviewed.

Steps you can take to protect your estate

None of the above Business Property Relief challenges are insurmountable. There are several options worth discussing with your adviser:

• Spread ownership sensibly . Ensure family members hold qualifying interests in the business to allow more than one £2.5 million allowance to be used across the family.
• Review your will . Because the allowance is now transferable between spouses, the old urgency to "use it or lose it" on the first death is reduced. But still review wills to make sure they work efficiently under the new rules.
• Consider lifetime gifts . Make Potentially Exempt Transfers (PETs) while relief is available.
• Plan for the IHT bill with insurance . A whole-of-life assurance policy written in trust can provide funds to meet an inheritance tax liability on death, while a fixed-term policy can cover the risk of a failed lifetime gift.
• Use the instalment option . Where tax is still due, spread it over ten interest-free annual instalments to ease the pressure on the business.
• Consider a share buy-back . In certain circumstances, a company buyback of shares can be used to fund the bill without incurring a capital gains or income tax charge. This relies on there being other shareholders and on meeting strict conditions.

The right approach depends entirely on your business, your family and your wider plans. Getting ahead of the changes now, rather than leaving it to your executors, is the best way to protect what you have worked hard to build.

Please get in touch with your usual Rickard Luckin contact to discuss your individual circumstances, or send our team a message today.