Proposed reforms to Business Property Relief (BPR) and Agricultural Property Relief (APR) represent one of the most significant shifts to inheritance tax (IHT) in recent years. These changes could materially increase future tax liabilities for business owners, farming families and investors. With the Government indicating an expected implementation date of April 2026, the timeframe to act is getting shorter.

Currently, qualifying assets can benefit from 100% IHT relief with no upper limit, offering valuable protection for the transfer of business and agricultural assets between generations. The proposed rules, however, introduce restrictions that will require many individuals to revisit their succession and estate planning well before the April 2026 deadline.

Since the initial announcement in October 2024, the government has made changes to the proposed rules. These are best summarised as follows:

Key changes

£2.5 million cap for full relief

100% IHT relief will apply to the first £2.5 million (previously £1 million) of qualifying business or agricultural assets per individual. Values above this threshold will receive only 50% relief, resulting in an effective 20% IHT charge.

Transferrable allowance

The £2.5 million 100% allowance will be per person. However, it has been confirmed that, unlike previously anticipated, any unused allowance will be transferable between spouses or civil partners on death.

If your spouse or civil partner died before April 6th 2026, then 100% of their allowance can be transferred to the survivor.

Reduced relief for AIM and non-main-market shares

Alternative Investment Market (AIM) listed and other non-main-market shares will not benefit from the new £2.5 million allowance. Relief on these assets will fall from 100% to 50%, significantly increasing potential IHT exposure for investors who currently rely on these shares within their planning.

Why it matters

These changes introduce complexity and could result in substantial tax liabilities for estates that previously expected to pass on assets free of IHT. With the reforms anticipated to take effect from April 2026, there is a limited period for individuals, families and businesses to review their position and, where appropriate, implement changes.

Waiting too long could mean:

• A reduced range of planning options
• Increased tax exposure
• Limited time to reorganise business structures or undertake valuations
• Succession plans becoming less effective under the new rules

Taking action ahead of April 2026 will provide greater flexibility and ensure your planning remains aligned with your long-term objectives.

How we can help

Our aim is to provide clear, practical guidance tailored to your specific circumstances. If you are concerned about how the proposed IHT changes may affect you, we strongly recommend seeking advice well ahead of the April 2026 deadline.

IHT review

Our tax specialists can review your estate and provide personalised recommendations, using estimated valuations to identify opportunities to reduce exposure to the new rules and mitigate potential future tax liabilities.

Business valuation

If your planning involves business assets or shareholdings, we can arrange for a formal business valuation through our valuation experts. This ensures decision-making is supported by accurate figures and helps refine the most appropriate planning strategy.

Wills and estate documents

Where updates to your wills or other estate documentation are required, we can work with your solicitor or introduce one to ensure your legal arrangements reflect the outcomes of your IHT planning and remain fit for purpose under the new regime.

Financial planning

The increase in the allowance to £2.5 million will mean a number of family businesses and farms will remain transferable tax-free under the new rules. For some, the additional 100% allowance may result in a more manageable IHT liability for their beneficiaries.  Those families may wish to consider increasing their life cover. It would be advisable to speak with a financial planner as part of any IHT planning process.

Next steps

The proposed changes to BPR and APR will reshape estate planning for many individuals. With April 2026 approaching, acting now is essential to secure the widest possible range of planning opportunities.

If you would like support reviewing your position or understanding the steps you may need to take, please contact Jo White, Partner, Head of Private Client Tax or James Amico, Private Client Tax Senior Manager:

Call: +44 (0)33 0124 1399
Email: enquiries@krestonreeves.com
Visit: www.krestonreeves.com