Inheritance tax update: Business Property Relief and Agricultural Property relief increase to £2.5m

Recent changes to Inheritance Tax (IHT) rules will be welcome news for many farming families and business owners.

The Government has confirmed that from 6 April 2026, the value of qualifying assets that can benefit from 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) will increase from £1 million to £2.5 million per individual.

This change has a direct impact on succession and estate planning for owners of farms, trading businesses and shares in qualifying companies.

What’s changing?

Under the revised rules:

• 100% APR and BPR will apply to qualifying assets up to £2.5 million per person
• Assets above £2.5 million may still qualify for relief, but typically at 50%
• Spouses and civil partners can combine allowances, meaning up to £5 million of qualifying business or agricultural assets could pass free of inheritance tax between them
• The changes apply from 6 April 2026

These thresholds sit alongside existing allowances, such as the nil-rate band and residence nil-rate band, which may also be available depending on individual circumstances.

Why this matters for business owners and farming families

APR and BPR are central to ensuring that businesses and farms can be passed to the next generation without forcing a sale simply to fund an inheritance tax bill.

The increase in the 100% relief threshold means that:

• More family-owned farms and businesses will remain fully protected from IHT
• Succession planning has greater flexibility, particularly where asset values have risen significantly
• Couples have more scope to plan jointly and structure ownership efficiently

That said, reliefs are not automatic. Eligibility depends on factors such as:

• The nature of the business or assets
• Ownership and usage
• Length of ownership
• How assets are structured between individuals, trusts and companies

What should you do next?

Although the changes do not take effect until 2026, now is the right time to:

• Review the value and structure of your business or agricultural assets
• Check that assets are likely to qualify for APR or BPR under the rules
• Revisit wills, partnership agreements and shareholder arrangements
• Consider whether any succession or gifting plans need adjusting

At Ward Williams, we work closely with business owners, farming families and individuals to ensure estate and succession plans remain robust, tax-efficient and aligned with family intentions.

If you would like to understand how these changes affect you, or to review your current plans, our tax and estate planning team would be happy to help. Call us on 01932 830664, email us enquiries@wardwilliams.co.uk or visit www.wardwilliams.co.uk

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Business Property Relief (BPR): What it means for business owners

For many business owners, their business is their most valuable asset, yet it is often the least understood when it comes to inheritance tax.

Business Property Relief (BPR) can play a crucial role in allowing a business to pass to the next generation without needing to be sold to fund an inheritance tax bill. Recent changes to inheritance tax thresholds have brought renewed attention to BPR, but the relief itself has long been an essential planning tool for owner-managed businesses.

Understanding how BPR works and whether your business is likely to qualify, is key to effective succession and estate planning.

 

What is Business Property Relief?

Business Property Relief can reduce the value of qualifying business assets for inheritance tax purposes by up to 100%, provided certain conditions are met.

From 6 April 2026, up to £2.5 million per individual of qualifying business value can benefit from 100% BPR, with relief potentially available at 50% above this level, depending on the type of asset and how it is held.

Importantly, there is no minimum business value required to qualify. Many smaller businesses benefit fully from BPR well below this threshold.

 

Does my business need to own property to qualify?

A common misconception is that BPR only applies to businesses that own commercial property. This is not the case.

BPR is based on what the business does, not whether it owns premises.

Businesses operating from:

• Rented offices
• Serviced or shared workspaces
• Home offices

may still qualify fully for BPR, provided they are genuinely trading.

The value eligible for relief can include goodwill, client relationships, contracts and retained profits — not just physical assets.

 

How BPR works in practice?

Example 1: Trading business with no property

A consultancy business operates from rented offices and has built up significant goodwill and long-term client contracts. The business is structured as a limited company and has been trading for several years.

Even without owning property, the shares in the company may qualify for 100% BPR, meaning the business value could pass without an inheritance tax charge.

 

Example 2: Business with commercial premises

A manufacturing company owns the factory it operates from. The business is clearly trading and the property is used wholly for business purposes.

In this case, the trading business value may qualify for 100% BPR, while the property may qualify at 50% or 100%, depending on how it is owned and used. Careful structuring can significantly improve the overall inheritance tax outcome.

 

Example 3: Business with surplus cash or investments

A successful business holds excess cash and a small portfolio of investments that are not required for day-to-day trading.

Only the trading element of the business is likely to qualify for BPR. Surplus cash or investment assets may be excluded, reducing the relief available. Regular reviews are important to ensure BPR eligibility is not weakened over time.

 

What BPR does not apply to

BPR does not generally apply to:

• Investment businesses, including most property-letting companies
• Assets not used for trading purposes
• Businesses where trading is not the main activity

As businesses grow or diversify, it is important to reassess whether they continue to meet the trading requirements for BPR.

 

Key questions business owners should be asking

To assess whether BPR is likely to apply, business owners should consider:

• Is my business wholly or mainly trading?
• Have I owned the business or shares for at least two years?
• Does the business hold assets that are not required for trading?
• Is ownership structured in the right way between individuals, spouses or trusts?
• How does BPR fit alongside my wider succession and estate plans?

 

Why reviewing BPR now matters

Although the updated thresholds apply from April 2026, BPR planning is most effective when reviewed well in advance.

Early reviews allow time to:

• Adjust ownership or structure if needed
• Address surplus or non-qualifying assets
• Align business succession with personal estate planning
• Avoid unexpected inheritance tax exposure later

For many owner-managed businesses, BPR is not something to assume, it is something to plan for and protect.

 

How Ward Williams can help

At Ward Williams, we work with business owners to provide clear, practical advice on:

• Whether a business is likely to qualify for BPR
• How much relief may be available
• How business and personal planning fit together
• What steps can strengthen a client’s position over time

Whether your business owns commercial property or operates entirely from rented premises, BPR can still play a vital role in succession and estate planning.

If you would like to review how Business Property Relief applies to your business, our tax and estate planning team would be happy to help.