By Michael Court, Tax Consultant, McEwan Wallace
We believe these changes will impact you, so please get in touch ASAP…
From 6 April 2026, major reforms to Business Property Relief (BPR) will take effect — significantly changing how business assets, such as shares in a trading company, are treated for Inheritance Tax (IHT).
These changes could dramatically increase future IHT bills for business owners, trustees, and families.
What's changing?
- A new £1 million cap on 100% relief for BPR
- Any value over this cap will qualify for relief at only 50%
- Only 50% relief for AIM-listed shares
- In the recent Budget is was confirmed that unused allowances will be transferred to a surviving spouse.
Until 6 April 2026, transfers can still be made under the current rules, which have unlimited relief, subject to certain parameters.
After that, this window closes and for any gifts or transfers onto trust will be bound by the £1m relief.
Tax planning now is crucial, so please contact us today so we can review your tax position with you before the rule changes.
We hope these examples will make it a little clearer…
Scenario 1
Jayne owns a private trading company. Her shares are worth £1.5 million. When she dies (or if she gifts shares during her lifetime and dies within seven years), these shares form part of her estate for Inheritance Tax (IHT) purposes.
Under today's rules (until 5 April 2026)
- The full £1.5 million attracts 100% BPR
- For IHT purposes, that value is effectively ignored
- Jayne's beneficiaries pay no IHT on the business
From 6 April 2026 onwards - Here's how Jayne's position changes:
- The first £1 million still gets 100% relief
- The remaining £500,000 gets only 50% relief
- Therefore, £250,000 becomes taxable at 40%, creating a £100,000 IHT bill that didn't exist before
What this means for Jayne's family
- Her family could face a £1000,000 IHT bill on a business once thought to be IHT-free
- As the business grows, more of its value will exceed the £1 million threshold — increasing the taxable portion
- Any gifts or transfers into trust will also count towards the same £1 million allowance
- Rising asset values may push you above the limit without realising it
- Trusts and lifetime gifts made now could also fall under the new limits
Scenario 2
Jayne owns a successful private trading company. Her shares are now worth £10 million, all currently qualifying for 100% Business Property Relief (BPR). When she dies (or if she gifts shares during lifetime and dies within seven years), the shares form part of her estate for IHT purposes.
Under today's rules (until 5 April 2026)
- The full £10 million attracts 100% BPR
- For IHT purposes, that entire value is ignored
- Her beneficiaries pay £0 IHT on the business
From 6 April 2026 onwards - Here is how Jayne's position changes:
- First £1 million → 100% relief
- Remaining £9 million → Only 50% BPR
- Taxable amount = £9m × 50% = £4.5m
- IHT at 40% = £1.8 million tax bill
- The amount is payable 6 months after death
What this means for Jayne's family
- A business that was previously completely IHT-free suddenly creates a seven-figure tax charge
- As the business continues to grow, the taxable portion grows too
- Any lifetime gifts or transfers into trust will also count towards the same £1m allowance
- If no planning is done, the estate may need to sell shares or borrow to fund the tax
- Payment is due 6 months after death
Why this matters (even if you think you're “fine”)
- The £1 million cap is shared across BPR and APR
- Business values can breach the cap easily — even modest growth pushes you above it
- Pre-2026 gifts may all be caught
- Estates with multiple qualifying assets (e.g., farms + business) use the same single pot
Here is just a taste of what needs to be considered…
- Obtain up-to-date valuations of your business or qualifying assets
- Review ownership structure — consider partial transfers or restructuring before April 2026
- Assess trust and gifting strategies under the new £1 million cap
- Plan for liquidity — ensure there's funding to cover potential IHT
- How will the payment be made – how will it be funded?
- Model both current and future positions with our tax specialists
- Plan for succession or sale of the business
In short: doing nothing can become extremely expensive. You need to plan NOW before the changes come in. So please arrange a meeting with us ASAP.