If you own a business or hold business assets in the UK, there’s a change coming that could affect how your estate is taxed. From 6 April 2026, the rules around Business Property Relief (BPR) are being updated — and it may no longer be safe to assume everything will stay the same.
At the moment, BPR offers 100% relief on qualifying business assets, meaning these can be passed on free of Inheritance Tax (IHT) when someone dies.
However, from April 2026, some important changes are coming:
- A new £1 million cap will be introduced for the 100% relief. This cap applies to the combined value of both agricultural and business property, and is available per individual or trust.
- Anything above the £1 million cap will only qualify for 50% relief. In practice, this means a 20% IHT rate will apply to the excess, rather than the usual 40%.
- The £1 million allowance won’t be transferrable between spouses or civil partners, so each person will need to use their own allowance.
- AIM-listed shares will only receive 50% relief instead of the current 100%.
These changes could have a significant impact on family businesses. It’s really important that business owners start planning now and seek advice well ahead of 6 April 2026.
Case Study: Cheshire Garden Supplies Ltd
Harry (75) and Wendy (63) run Cheshire Garden Supplies Ltd, a family business now valued at £1.5 million, with both children actively involved. The company holds £800,000 in cash, set aside for relocating to commercial premises — but no suitable property has been found.
This cash may be considered surplus to business needs, risking exclusion from Business Property Relief (BPR). They also hold EMI shares for their children, nearing the £250,000 cap, and minor non-trading investments, adding further complexity.
With BPR reforms expected in April 2026, these assets face restricted relief — especially where cash or shareholdings exceed qualifying thresholds.
If No Action Is Taken
If Harry dies and the shares pass to Wendy, and she later dies without restructuring:
- Harry has not used his £1M allowance and it has been wasted. If Wendy inherits the shares and later passes away without restructuring, the new £1 million BPR cap could limit the relief available on the business, potentially exposing up to £500,000 of value to 20% IHT, resulting in an additional £100,000 tax liability.
- The £800,000 surplus cash could be treated as an excepted asset
- This could result in an inheritance tax charge of up to £320,000
- EMI shares exceeding the cap may lose BPR entirely
- Non-trading assets could jeopardise relief across the group
Next Steps
These changes are complex, and the impact could be significant — especially for family-run businesses. The good news is that with the right advice and planning, you can still protect your legacy and make sure your estate passes smoothly to the next generation.
The Wills, Trusts and Estate team at Slater Heelis Solicitors have a wealth of experience when it comes to advising on all forms of tax mitigation and reviewing Wills and Trusts already in place. If you haven’t already, now’s the time to speak to a member of the team and start putting a plan in place. April 2026 will be here before you know it!
Get In Touch
Alex Sealy is the Head of our Wills & Probate team. He regularly advises on LPAs, Wills, Trusts, Probate and Estate Planning. We understand that these issues often arise during emotionally difficult times, and we’re here to provide clear, compassionate, and practical advice.
If you have questions or concerns, we’re here to help. Get in touch with one of our solicitors by calling 0330 111 3131 or fill out our online contact form.
