Planning for the April 2026 business property relief changes  – what do advisers need to know?

Written by Neal Lees, Director, and Richard Potts, Senior Manager – Buzzacott

From April 2026, the rules on passing on a business tax-efficiently will change significantly. In July, the government published draft legislation covering the changes to Business Property Relief (BPR) announced in their Autumn Budget 2024. This was a clear signal of their commitment to implementing these reforms, but a disappointment to those who were hoping for a softening of the rules, or even a complete reversal, and these incoming rules now command the attention of those affected and their advisers   

What’s changing – and why it matters 

Currently, qualifying businesses of any value can be passed on free from inheritance tax. From 6 April 2026, BPR relief will be available at 100% on qualifying property up to £1 million with a reduced rate of 50% applying to amounts above this threshold. This limit effectively increases the inheritance tax (IHT) rate from 0% to 20% on qualifying business assets beyond £1m and presents a new and significant challenge when navigating business succession.   

The 50% rate of BPR and effective 20% rate of IHT will continue to apply to:  

• shares controlling more than 50% of the voting rights in a listed company;   

• land, buildings or machinery used in a business of which the individual is a partner in or that is controlled by them; or  

• land, buildings or machinery owned by a trust and used in a business conducted by the life tenant.  

The change means that shares in an unlisted trading company, or interest in a business (including a partnership), which previously qualified for 100% relief, will only receive 50% on the value above the £1m per person allowance, These changes will significantly impact estates containing qualifying assets valued at over £1m. In addition, where there have been lifetime transfers of such assets in the seven years prior to death, any failed PETs (Potentially Exempt Transfers) will also need to be considered and would utilise the £1m BPR allowance first. 

As an example, if an individual were to die before April 2026 with a qualifying business valued at £10m, and all other assets covered by (and fully utilising) their nil rate bands, there would be no IHT payable by their executors under the current rules. If they were to die after 5 April 2026, then there would be an IHT liability of £1.8m. 

Advising on these changes – key planning options 

With 6 April 2026 fast approaching now is the time to review planning opportunities available for your clients and allow sufficient time for any necessary actions.  

An outright gift made at any point during lifetime can remove the value of the business from an individual’s estate, provided they survive seven years. Capital Gains Tax (CGT) holdover relief may allow qualifying gifts to be made without triggering an immediate tax charge. While this can feel like a simpler route, it does mean giving up some, or all, control of the business, which is a step many owners aren’t ready to take just yet. 

Transferring assets qualifying for 100% BPR into a family trust is likely to be a key consideration for many business owners. This will allow the owner to retain control as a trustee, whilst moving value outside of their estate for IHT purposes, again providing they survive seven years. If action is taken before 6 April 2026, the transfer could be free of IHT and it should be possible to holdover the gain for CGT purposes, subject to the usual conditions. Consideration should be given to the costs of establishing and running the trust, including any 10-year and exit charges– so there are no surprises later on. 

As an alternative to a trust, business owners may consider setting up a Family Investment company (FIC). This would remove value from the business owner’s estate during their lifetime, or at least remove future growth in value through the use of so-called ‘freezer’ shares.   

Taking out a life insurance policy may also be considered as part of business succession planning. Having a policy in place could be crucial in providing liquidity to the next generation, ensuring the business remains within the family, especially in the event of an unexpected death. Generally, the earlier cover is taken, the lower the premiums. 

Looking beyond April 2026 

It is worth noting that the £1 million BPR allowance will refresh every seven years on a rolling basis in respect of any chargeable lifetime transfers, such as transfers into trusts. It may also remain possible to consider some planning post April 2026, utilising the allowance every seven years. The efficacy of this would depend on the overall value of the business asset in question. In some cases a mix of transfers both pre and post April 2026 may be desirable. 

Next steps 

Weighing up the pros and cons of each option as early as possible will be invaluable in making an informed decision based on personal circumstances and succession goals. While we would generally not recommend implementing any planning until after the Autumn Budget, delaying consideration until then will be too late. Having an outline plan of action in place beforehand will ensure that any further announcements can be fully factored in before a final decision is made.