Business property relief changes in 2026 cap a relief that, for years, let many company owners pass on a trading business free of inheritance tax. From 6 April 2026, the 100% rate of relief applies to the first £2.5 million of qualifying business and agricultural property per person, with 50% relief on anything above that (gov.uk, effective 6 April 2026, subject to change). The cap is higher than the £1 million first announced, and it is now law. This article explains what changed, in general terms, for business owners.
What business property relief is
Business property relief (often shortened to BPR, and referred to by HMRC as business relief) is an inheritance tax relief that can reduce the taxable value of qualifying business assets passed on during life or on death. It has commonly applied to interests in a trading business and to shares in an unquoted trading company, subject to conditions. Because inheritance tax is charged at 40% on the value of an estate above the available nil-rate band (House of Commons Library, as at July 2026, subject to change), relief on a business can make a large difference. What qualifies is detailed and depends on the facts.
What changes on 6 April 2026
From 6 April 2026, 100% relief is limited to the first £2.5 million of combined qualifying business and agricultural property per person. Value above the allowance receives 50% relief, which works out at an effective inheritance tax rate of up to 20% on the excess rather than the full 40% (gov.uk, effective 6 April 2026, subject to change). Inheritance tax on those assets can be paid in equal instalments over 10 years, interest-free.
| Element | Before 6 April 2026 | From 6 April 2026 |
|---|---|---|
| 100% relief on qualifying business and agricultural property | Unlimited qualifying value | First £2.5m per person, then 50% above |
| Unquoted private trading company shares | Up to 100% | Up to 100%, within the £2.5m allowance |
| Value above the £2.5m allowance | Not applicable | 50% relief (effective IHT rate up to 20%) |
| AIM shares (and similar non-recognised-market shares) | Up to 100% | 50%, and outside the £2.5m allowance |
| Unused allowance | Not applicable | Transferable to a surviving spouse or civil partner |
Source: gov.uk, effective 6 April 2026, subject to change.
The number that changed: from £1 million to £2.5 million
The cap did not land where it started, which is why a lot of the advice still circulating is out of date. At Autumn Budget 2024 the government announced a £1 million allowance for the 100% rate (House of Commons Library, as at July 2026, subject to change). On 23 December 2025 it raised that allowance to £2.5 million per person, allowing spouses and civil partners to pass on up to £5 million of qualifying assets between them (gov.uk, announced 23 December 2025, subject to change). The measure then became law through the Finance Act 2026 (House of Commons Library, as at July 2026, subject to change). In our view, the practical takeaway is simple: check the current figure before acting on anything written during the earlier debate.
AIM shares and the 50% rate
Shares quoted on AIM, and on other markets that are not recognised stock exchanges, move from up to 100% relief to 50% relief from 6 April 2026 (gov.uk, effective 6 April 2026, subject to change). This 50% treatment sits outside the £2.5 million allowance. It is separate from shares in a private, unquoted trading company, which can still qualify for up to 100% relief within the £2.5 million allowance, subject to the usual conditions. Where an AIM portfolio was built partly with inheritance tax relief in mind, it can be worth reviewing the position with a qualified professional, because the relief it was relied on for has changed.
How the allowance works with the nil-rate band and between spouses
The £2.5 million allowance sits on top of the ordinary inheritance tax allowances. Every estate still has the standard nil-rate band of £325,000, and where a home passes to direct descendants there is a residence nil-rate band of up to £175,000, both frozen until 5 April 2031 (House of Commons Library, as at July 2026, subject to change). Any unused £2.5 million business and agricultural allowance can pass to a surviving spouse or civil partner, so a couple may between them cover up to £5 million of qualifying assets (gov.uk, as at July 2026, subject to change). None of this is automatic; the allowances and transfers have to be claimed correctly by the people administering the estate.
As a general illustration only, and not advice for any individual: a wholly qualifying business worth £4 million, passed on by one person after 6 April 2026, could attract 100% relief on the first £2.5 million and 50% relief on the remaining £1.5 million. Halving the £1.5 million leaves £750,000, which would then be considered against any other available allowances or taxed at the applicable rate. Every business is different, and the real outcome depends on what qualifies, how the assets are owned, and the rest of the estate.
What some business owners are looking at
There is no single right answer here, and none of the following is a recommendation for any particular person. In general terms, owners reviewing the change often look first at how their business is owned and what their will says about business assets, since relief can be lost where assets are left in a way that does not use the allowances well. Many people also check that a shareholders’ agreement or succession plan reflects what they actually want to happen. Some consider lifetime giving, where the seven-year rule can apply to gifts (gov.uk, Inheritance Tax and gifts guidance, as at July 2026, subject to change). Others hold life cover written in trust to provide funds toward a possible future bill; life cover is a regulated product, and an FCA-authorised adviser is the right person to advise on it. Each of these steps carries trade-offs, and it can be worth discussing them with a suitably qualified professional before acting.
Frequently asked questions
What is the business property relief cap from 2026? From 6 April 2026, the 100% rate of business and agricultural property relief applies to the first £2.5 million of qualifying assets per person, with 50% relief above that (gov.uk, effective 6 April 2026, subject to change). The 50% rate gives an effective inheritance tax rate of up to 20% on the value above the allowance. The position depends on individual circumstances.
Is business property relief being abolished? No. Business property relief continues, but the 100% rate is now capped rather than unlimited. Qualifying value above £2.5 million per person receives 50% relief instead of 100% (gov.uk, effective 6 April 2026, subject to change). Whether and how it applies to a particular business depends on the facts, so it can be worth taking advice.
Does the £2.5 million allowance apply per person or per couple? It applies per person. Any unused part of the allowance can pass to a surviving spouse or civil partner, so a couple may cover up to £5 million of qualifying assets between them (gov.uk, as at July 2026, subject to change). The transfer is not automatic and has to be claimed.
What happens to AIM shares? From 6 April 2026, shares quoted on AIM and on similar markets that are not recognised stock exchanges move from up to 100% relief to 50% relief, and they sit outside the £2.5 million allowance (gov.uk, effective 6 April 2026, subject to change). Shares in a private, unquoted trading company are treated differently and can still qualify for up to 100% relief within the allowance, subject to conditions. Anyone holding AIM shares partly for inheritance tax reasons may want to review the position with a qualified professional.
Is this actually law, or just proposed? It is law. The reform was announced at Autumn Budget 2024, the allowance was raised to £2.5 million on 23 December 2025, and the change was enacted in the Finance Act 2026 (House of Commons Library, as at July 2026, subject to change). Figures and rules can still change in future, so it is sensible to check the current position before acting.
Does this apply in Scotland and Northern Ireland? Inheritance tax, including business and agricultural property relief, is a UK-wide tax, so the reform applies across the UK (gov.uk, as at July 2026, subject to change). Some related steps, such as how wills and succession work, differ in Scotland and Northern Ireland. Fairchild Oldfield works with families across England and Wales.
About Fairchild Oldfield
This article was written by the Fairchild Oldfield team. Fairchild Oldfield are estate planning specialists and will writers helping families across England and Wales with wills, trusts, lasting powers of attorney and inheritance tax planning. Fairchild Oldfield are not a firm of solicitors or a regulated financial adviser. You can read more about their approach at Fairchild Oldfield.
Important information
This article is general information based on practical experience. It is not legal, tax or financial advice, and reading it does not create a professional relationship. It is based on the law of England and Wales, and other UK jurisdictions may differ. Figures and rules are current as at August 2026 and are subject to change. Inheritance tax is complex and the right course depends on individual circumstances. Before acting, many people choose to seek advice from a suitably qualified professional, such as a solicitor, a STEP practitioner, an accountant, or an FCA-authorised financial adviser, who can consider your own situation.
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