What changes to Business Property Relief and Agricultural Property Relief from April 2026?

From 6 April 2026, Business Property Relief (BPR) and Agricultural Property Relief (APR) will be capped at £2.5 million per person with 100% relief. Any qualifying value above £2.5 million receives only 50% relief, creating an effective 20% inheritance tax rate on the excess. For couples, the unused allowance transfers to a surviving spouse, giving a potential £5 million combined 100% relief.

How much inheritance tax will a £4 million family business pay after April 2026?

A £4 million family business qualifying for BPR would pay £300,000 in inheritance tax after April 2026. The first £2.5 million receives 100% relief (£0 tax). The remaining £1.5 million receives 50% relief, leaving £750,000 taxable at 40%, resulting in £300,000 tax. Before April 2026, the same business would have paid £0.

Can married couples combine their BPR and APR allowances?

Yes. The unused £2.5 million BPR/APR allowance transfers to a surviving spouse or civil partner, giving couples a potential £5 million combined 100% relief. For a jointly owned business or farm worth £6 million, the excess above the £5 million combined allowance would be £1 million, with 50% relief leaving £500,000 taxable at 40%, resulting in £200,000 inheritance tax.

Why do the BPR and APR changes matter for family farms?

Most family farms are asset rich but cash poor. The new rules mean inheritance tax may be due even where reliefs still apply, tax is triggered without a sale or break up of the farm, borrowing or forced asset sales may be required, and successors inherit a tax problem, not just an asset. Rising land values mean more farming families will be caught over time.

What is the effective inheritance tax rate on business assets over £2.5 million?

The effective inheritance tax rate on qualifying business or agricultural assets above the £2.5 million threshold is 20%. This is because the excess receives 50% Business Property Relief or Agricultural Property Relief, leaving half the value taxable at the standard 40% rate (50% x 40% = 20%).

BPR and APR Changes for Family Businesses and Farms from April 2026

Direct answer: From 6 April 2026, Business Property Relief (BPR) and Agricultural Property Relief (APR) will no longer provide unlimited 100 percent inheritance tax relief. Full relief will be capped at £2.5 million per person, with any excess qualifying assets receiving only 50 percent relief, creating an effective 20 percent inheritance tax charge on the excess.

For couples, the allowance is transferable, giving a potential £5 million combined 100 percent relief, but estates above this level will face inheritance tax for the first time, often without sufficient cash to pay it.

Key Facts at a Glance

Effective date: 6 April 2026
Reliefs affected: Business Property Relief (BPR) and Agricultural Property Relief (APR)
Full relief limit: £2.5 million per person
Relief above limit: 50 percent
Effective tax rate on excess: 20 percent
Transferable between spouses or civil partners: Yes
Instalments available: Up to 10 years for qualifying business and agricultural assets
Applies alongside: Nil Rate Band and Residence Nil Rate Band

What Are BPR and APR?

Business Property Relief (BPR) and Agricultural Property Relief (APR) are inheritance tax reliefs designed to allow trading businesses and farms to pass between generations without being broken up to pay tax.

APR applies to qualifying agricultural land, buildings, and in some cases farmhouses. BPR applies to qualifying trading businesses, including unlisted shares and interests in partnerships.

Until now, both reliefs could apply at 100 percent with no upper limit.

What Changes from 6 April 2026

From 6 April 2026:

The first £2.5 million of combined qualifying BPR and APR assets per individual continues to receive 100 percent relief
Any qualifying value above £2.5 million receives 50 percent relief
The unused allowance transfers to a surviving spouse or civil partner
This creates a maximum £5 million combined 100 percent relief for couples
The excess above this level is exposed to inheritance tax at an effective 20 percent

This is a structural change. It introduces a permanent inheritance tax exposure for larger family businesses and farms, even where assets remain fully trading.

Worked Example: Single Business Owner

A family business is valued at £4 million and qualifies fully for BPR.

£2.5 million at 100% relief = £0 tax
£1.5 million at 50% relief leaves £750,000 taxable
Inheritance tax at 40% on £750,000 = £300,000

Before April 2026: £0 tax | After April 2026: £300,000 tax

Worked Example: Married Couple or Civil Partners

A jointly owned trading business and farm is valued at £6 million, fully qualifying for BPR and APR.

Combined 100% relief available: £5 million
Excess above allowance: £1 million
50% relief applied to excess leaves £500,000 taxable
Inheritance tax at 40% = £200,000

The assets remain in the family, but liquidity is required to pay the tax.

Why This Matters for Family Businesses and Farms

Most family businesses and farms are asset rich but cash poor. The new rules mean:

Inheritance tax may be due even where reliefs still apply
Tax is triggered without a sale or break up of the business
Borrowing or forced asset sales may be required
Successors inherit a tax problem, not just an asset

Rising Values Mean More Families Affected Over Time

Rising land and business values mean more families will be caught over time, even if they are below the thresholds today. The £2.5 million cap is not index-linked.

Interaction with Other Inheritance Tax Rules

The BPR and APR caps sit alongside existing inheritance tax rules, including:

Nil Rate Band of £325,000 per person
Residence Nil Rate Band, subject to taper above £2 million estates
Instalment payment rules for qualifying assets (up to 10 years)
Anti-forestalling provisions for certain lifetime transfers

For many estates, the combined effect is a larger and earlier inheritance tax exposure than expected.

Model Your Business or Farm IHT Exposure

See how the BPR and APR caps affect your inheritance tax liability. Get instant indicative insurance cost estimates.

Use the IHT Calculator

Planning Implications

The change shifts planning away from pure relief reliance and toward liquidity planning.

Common responses include:

Reviewing ownership structures and qualifying status
Lifetime gifting strategies, where appropriate
Trust planning in specialist cases
Creating guaranteed liquidity to meet inheritance tax without asset sales

For many families, insurance-based liquidity planning becomes the most practical solution because it provides certainty without disrupting ownership or control.

Why Accurate Modelling Matters

Many online calculators and commentary still assume unlimited BPR and APR. That assumption will be wrong from April 2026.

Accurate modelling allows families to:

Quantify the real exposure
Decide whether planning is proportionate
Assess whether liquidity solutions are affordable before underwriting

Important Disclaimer

This page provides technical background and general information only. It does not constitute personal tax, legal, or financial advice. Inheritance tax outcomes depend on individual circumstances, asset structure, relief qualification, and future legislation. Always consult a specialist tax accountant or solicitor for personalised advice — we focus solely on the protection element, working alongside your trusted advisers.

How the April 2026 BPR and APR changes affect family businesses and farms

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