Since our previous article on the business property relief (BPR) and agricultural property relief (APR) reforms, the Government has announced further - and more positive - changes.
The improved position
Under the current rules, BPR/APR provides unlimited 100% relief from inheritance tax (IHT) on qualifying property. From 6 April 2026, a cap is being introduced for the 100% relief, with any value exceeding the cap receiving 50% relief instead.
This cap was originally set to be £1 million. However, over the Christmas period the Government announced the cap would be increasing to £2.5 million. This represents a significant improvement and will provide welcome relief to many farmers and other family businesses.
In the 2025 Autumn Budget, the Government also confirmed that spouses will now be able to transfer their unused 100% cap on death, mirroring the way the £325,000 nil rate band (NRB) currently works. This is also a welcome simplification as it removes the need to restructure ownership such that sufficient assets are held personally by both spouses, and for Wills to include BPR/APR trusts on the first death.
These changes represent a meaningful softening of the original proposals, particularly for married couples. Where a family business or farm is valued below £5.65 million, there could be no IHT to pay (although IHT would still be payable on other non-qualifying assets).
The planning opportunity remains
Despite the relaxation, for owners of substantial businesses - those valued in the tens or hundreds of millions - the increased £2.5 million threshold remains largely inconsequential. A business worth £50 million, for example, will still face an effective IHT rate of around 18% on the owner's death (compared to nothing under current rules) - a £9 million increase in IHT liability.
For these types of high-value businesses, the planning opportunity highlighted in our previous article remains very relevant. As a reminder, the planning involves transferring some or all of the business into trust before 6 April 2026. After that date, this will trigger an immediate IHT entry charge, but until 6 April, BPR will continue to provide full relief from this charge, allowing substantial wealth to be placed into a flexible and protective family trust, in a tax efficient manner.
Time to act
With just under two months until the reforms take effect, business owners should be reviewing their succession plans now. Although there is still time, the window for accessing 100% relief is closing fast.