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

Are you aware of the changes to BPR and APR?

The Autumn Budget 2024 introduced major reforms to inheritance tax (IHT) reliefs for assets eligible under Agricultural Property Relief (APR) and Business Property Relief (BPR), with further minor adjustments announced in the 2025 Budget.

Summary of key changes effective from 6 April 2026

1. £2.5 million cap on 100% relief

• The 100% rate of APR and BPR will be capped at the first £2.5 million of combined qualifying agricultural and business assets. This £2.5 million cap will be index-linked from 6 April 2031 in line with the Consumer Prices Index (CPI).
• Any value exceeding £2.5 million in combined qualifying property will only receive 50% relief, resulting in an effective IHT rate of 20% on the excess.
• The new cap will apply both on death and for lifetime gifts or transfers.
• Any unused portion of the £2.5 million allowance will be transferable between spouses or civil partners on death. This allows couples to benefit from a combined allowance of up to £5 million, including where the first death occurs before 6 April 2026, broadly mirroring the existing transferable nil rate band rules.
• For lifetime gifts, the £2.5 million allowance for 100% relief will refresh every 7 years.
• For relevant property trusts, the allowance will refresh every 10 years in line with the periodic 10-year charge.

2. Alternative Investment Market (AIM) shares

• Shares in companies classified as “not listed” on recognised stock exchange markets (including AIM-listed shares and EIS companies quoted on AIM) will no longer qualify for 100% relief and will instead attract relief at 50% on the full value of the holding.
• As a result, AIM shares will not count towards the £2.5 million allowance for 100% relief.

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 rules, but the new rules (including the £2.5 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.
• Anti-fragmentation rules
  • Existing trusts (created before 30 October 2024):
    Each such trust will be entitled to its own £2.5 million allowance for 100% relief.
  • New trusts (created on or after 30 October 2024): Trusts created on or after 30 October 2024 will be subject to aggregation rules designed to prevent the use of multiple trusts to circumvent the £2.5 million cap. Accordingly, trusts established by the same settlor will share a single £2.5 million allowance, which will be allocated on a chronological basis by reference to the value of qualifying property settled.

• Capital appointments
  • Existing trusts (assets settled before 30 October 2024): Capital appointments of these assets will continue to benefit from the uncapped 100% relief until the first 10-year anniversary occurring after 6 April 2026. Thereafter, capital appointments from such trusts will be subject to the £2.5 million cap, with 50% relief applying to any excess.
  • New trusts (assets settled on or after 30 October 2024): For these trusts, the old rules apply only until 5 April 2026. Capital appointments made on or after 6 April 2026 will be subject to the £2.5 million cap, with relief at 50% on any value exceeding the allowance.

• First 10-year anniversary after 6 April 2026

HMRC will split the 10-year period:

• The period before 6 April 2026 benefits from the uncapped 100% relief under the old rules.
• The period after 6 April 2026 is subject to the £2.5 million cap.

• How the allowance works in practice
  • The allowance can be applied to qualifying property distributed from the trust, thereby reducing any IHT liability arising on appointment.
  • Each utilisation of the allowance reduces the remaining available amount until the next 10-year anniversary resets the allowance.
  • At each 10-year anniversary, the allowance is fully refreshed, reinstating a £2.5 million allowance for the subsequent 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.

How we can help

Following these changes, trust exit charges and 10-year periodic charges have become more complex, as they now depend on when assets were settled and the extent to which the £2.5 million allowance has been utilised. If you would like to discuss how these changes may affect your trust or estate planning, please do not hesitate to contact us.

Updated 14 April 2026

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