Business Property Relief and Agricultural Property Relief: What the 2026 Reforms Mean for Business Owners and Families

For many, this is the first time there has been a real need to consider a potential inheritance tax exposure on assets that would historically have passed free of tax. As a result, it is increasingly important to review estate and succession planning at an earlier stage to avoid unexpected outcomes.

For many families, this is not just about tax. It is about ensuring that what they have built up can pass on smoothly and continue to support the next generation.

What are the changes to Business Property Relief and Agricultural Property Relief 

From April 2026, there is no longer unlimited inheritance tax relief on qualifying business and agricultural assets. Instead, a combined allowance of £2.5 million per individual now applies across both BPR and APR. Assets within that allowance will continue to benefit from 100% relief, but anything above it will generally only qualify for 50% relief, resulting in an effective inheritance tax rate of 20% on the excess.

This represents a clear departure from the previous position, where many family businesses could be passed down entirely free of inheritance tax if they met the qualifying conditions. For business owners with assets exceeding the allowance, there is now a genuine exposure to inheritance tax, even where the business remains fully eligible for relief.

The position is similar for farms. Given current land values, it is not uncommon for agricultural estates to exceed the new threshold. This means that estates which previously expected little or no inheritance tax liability may now find themselves facing one. In practical terms, there is a renewed need to consider how any liability will be funded and whether the structure of the business or ownership of land remains appropriate. It is also important to remember that APR only applies to the agricultural value of land, so any additional development or “hope” value may fall outside the relief.

However, it should be noted that the £2.5 million allowance is transferable between spouses and civil partners, which means that, in many cases, a couple can pass up to £5 million of qualifying assets at full relief, subject to careful structuring.

How the changes apply to Trusts

Relevant property trusts, which include most lifetime trusts and some trusts created on death, are subject to inheritance tax charges, including ten‑year anniversary charges of up to 6% and charges when assets leave the trust.

Historically, where such trusts held assets qualifying for BPR or APR, those assets could often pass free of inheritance tax without restriction. That is no longer the case. From April 2026, the same £2.5 million cap also applies to assets held in trust, with any value above that level only benefiting from 50% relief.

The way the allowance is applied is also important. It operates on a chronological basis, so earlier distributions effectively use up the available allowance first, with any remaining allowance then carried forward to later ten‑year charges. Once the allowance has been exhausted, only 50% relief will apply, which can result in an effective tax charge of up to 3% on the value of the trust at each ten‑year anniversary.

There are also new rules designed to prevent multiple trusts being used to increase available relief. In broad terms, a single £2.5 million allowance is shared across trusts created by the same settlor, which makes the timing and structuring of transfers into trust more important than before.

Payment of Inheritance Tax

Where business or agricultural assets do give rise to an inheritance tax liability, there is some flexibility in how that tax is paid. Generally the tax can be paid by instalments over a period of up to ten years. Importantly, these instalments will not attract interest, which is a helpful concession and provides some breathing space for families. 

That said, the liability still needs to be managed, and the existence of an instalment option should not be seen as a substitute for proper planning. In many cases, it will still be necessary to ensure that there is sufficient liquidity within the estate to meet the liability without putting pressure on the underlying business or farming operations.

What should you do next?

This is an area where taking advice early can make a real difference. Many existing Wills and estate plans were put in place on the basis that business and agricultural assets would qualify for full relief, and that assumption may no longer hold true.

Where lifetime giving is being considered, this needs to be approached with care. Whilst gifting assets can reduce an estate for inheritance tax purposes if the individual survives seven years, it can also trigger capital gains tax on any increase in value. In contrast, assets passing on death are generally rebased for capital gains tax. The right approach will depend on the particular circumstances and should always be considered alongside tax advice.

It is therefore sensible to review your Wills and wider estate planning arrangements to ensure they still produce the intended outcome. A key starting point is to understand the current value of relevant assets and how they sit against the new allowance. From there, it may be appropriate to consider whether any lifetime planning or restructuring should be explored, although this needs to be approached carefully from a tax perspective.

Ultimately, these changes do not remove the reliefs, but they do mean they can no longer be relied upon in the same way as before. For many families, the position will still be manageable, but it now requires more deliberate planning. Taking advice early, and keeping arrangements under review, will usually provide far more flexibility than trying to address matters at a later stage.

Frequently Asked Questions

What are the changes to Business and Agricultural Property Relief from April 2026? 

From 6 April 2026, APR and BPR are no longer unlimited. A combined £2.5 million allowance now applies, with anything above that generally only qualifying for 50% relief, creating a potential inheritance tax exposure.

What is the current allowance for Business Property Relief and Agricultural Property Relief?

From April 2026, a combined allowance of £2.5 million applies across BPR and APR — higher than the £1 million originally proposed. Assets within this allowance continue to qualify for 100% relief. Spouses and civil partners can each use their own allowance, meaning couples may be able to pass up to £5 million of qualifying assets at full relief with careful structuring.

Can trusts still hold assets that qualify for BPR or APR after the reforms? 

Yes, trusts can still hold assets and continue to be a very useful succession planning tool. However, consideration must be given to what assets are transferred to a trust as the £2,500,000 cap applies and so there may be ongoing tax charges for assets over this sum.

What should business owners and farmers do now in response to the BPR and APR changes? 

Taking advice early makes a real difference. Existing Wills and estate plans may have been structured on the assumption of unlimited relief, and that assumption no longer holds. There are still planning options available — the sooner these are considered, the more flexibility there is to put appropriate structures in place.

About the Author

Charlotte Warren is a Partner at Grant Saw Solicitors LLP specialising in trusts, estate planning and succession planning. She advises high-net-worth individuals, business owners and families on inheritance tax planning, the use of trusts, and long-term strategies for preserving and transferring wealth — including family businesses — across generations.

Charlotte qualified as a solicitor in 2015, training in Sussex before developing her expertise at prominent regional firms across London and Surrey. She joined Grant Saw in 2020, where she leads the Trusts team from the firm's Greenwich office. 

She is a fully qualified member of the Society of Trusts and Estate Practitioners (STEP) and the Association of Lifetime Lawyers — the two leading professional bodies in private client and estate planning practice. 

Charlotte is a regulated solicitor authorised by the Solicitors Regulation Authority.

Trust and estate planning advice

Grant Saw's Trusts team advises individuals, families and business owners across Greenwich and South East London on inheritance tax planning, trust structures and succession planning.

If you are thinking about your estate or considering how best to protect and pass on your assets, Charlotte and her team can help. 

Call 020 8858 6971 or email charlotte.warren@grantsaw.co.uk to discuss your circumstances.

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Disclaimer

This article is for general information only and is not legal advice. Laws and guidance change and outcomes depend on facts. If you need advice on your situation, please contact us. Grant Saw Solicitors LLP is authorised and regulated by the Solicitors Regulation Authority.