Key changes to Business Property Relief and Agricultural Property Relief from 6 April 2026

Are you aware of the upcoming changes to BPR and APR?

The 2024 Autumn Budget introduced changes to inheritance tax (IHT) relief for assets qualifying for Business Property Relief (BPR) and Agricultural Property Relief (APR).

Summary of key changes from 6 April 2026

1. £1 million cap on 100% relief

• The 100% rate of APR and BPR will be capped at the first £1 million of combined qualifying agricultural and business property.
• Any value above £1 million in combined qualifying property will only receive 50% relief (i.e. effectively a 20% IHT rate on the excess).
• The new cap will apply both on death and for lifetime gifts or transfers.
• The £1m allowance is not transferable between spouses or civil partners.
• For trusts, the allowance refreshes every 10 years in line with the periodic 10-year charge. For individuals, it does not refresh.

2. Shares in companies do not qualify for 100% BPR

• Shares listed on the Alternative Investment Market (AIM) will be limited to 50% BPR.
• These 50% BPR shares do not count toward the £1 million 100% relief allowance.

3. Transitional rules apply to gifts made on or after 30 October 2024 but before 6 April 2026

• Lifetime gifts or transfers will initially be assessed under the old APR/BPR rules, but the new rules (including the £1 million cap) will apply if the donor dies on or after 6 April 2026 and within seven years of making the gift.
• Similar transitional rules apply to transfers of qualifying property into trusts, with the old rules applying initially and the new rules applying when the relevant charge arises after 6 April 2026.

4. Changes to BPR and APR for trusts

• Most lifetime trusts fall within the relevant property regime, which means they may face:
  • Entry charge – up to 20% on creation if the value exceeds the nil-rate band.
  • 10-year periodic charge – up to 6% of the trust’s value at each 10-year anniversary.
  • Exit charge – applied when assets are appointed out.
• £1 million allowance
  • Existing trusts (before 30 October 2024):
    Each such trust will have its own £1 million allowance of 100% relief.
  • New trusts (on or after 30 October 2024):
    Trusts created by the same settlor will share a single £1 million allowance, allocated chronologically based on the value of qualifying property settled.
• Capital appointments
  • Assets settled before 30 October 2024:
    Capital appointments of these assets continue under the old rules (unlimited 100% relief) until the next 10-year charge.
  • Assets settled after 30 October 2024:
    These benefit from the old rules only until 5 April 2026. From 6 April 2026, they will be subject to the new rules.
• First 10-year periodic charge after 6 April 2026

HMRC will split the 10-year period:

• The period before 6 April 2026 benefits from full 100% relief under the old rules.
• The period after 6 April 2026 is subject to the £1 million cap.

• How the allowance works in practice
  • The allowance can be applied to qualifying property appointed out of the trust, reducing the IHT due.
  • Each time part of the allowance is used, it reduces the remaining amount available for the next 10-year periodic charge.
  • At each 10-year anniversary, the allowance is refreshed, creating a new £1 million allowance for the following 10-year period.

5. Instalment payments of IHT extended to qualifying property

• The option to pay IHT in equal, interest-free instalments over up to 10 years will be extended to all property eligible for APR or BPR.

Families with substantial business or agricultural assets should consider reviewing their trust arrangements before April 2026 to maximise available relief.

Trust exit and 10-year periodic charges will become more complex, as they depend on when assets were settled and how much of the £1 million allowance has been used. In these cases, professional advice should be sought.

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