Read the previous article in our Inheritance Tax Series, here: Pensions and Inheritance Tax – What’s Changing and What It Means for You
If you’re a business owner, landowner or farmer, inheritance tax (IHT) planning has always required careful consideration. Until now, two generous reliefs Business Property Relief (BPR) and Agricultural Property Relief (APR) have allowed many family businesses and farms to pass through generations with little or no IHT.
That is changing.
From April 2026, the government has introduced major reforms to these reliefs. For some families, this will make little difference. For others, it could create a sizeable tax bill where none existed before.
1. What’s Changing in April 2026?
From April 2026, estates will only receive 100% relief on qualifying business or agricultural property up to a combined value of £2.5 million. Anything above that amount will qualify for only 50% relief.
If one spouse dies and hasn’t used all of their £2.5 million cap, the unused amount can be transferred to the surviving spouse or civil partner. This means couples may have up to £5 million of qualifying business or agricultural property that can still pass free of IHT (in addition to the standard nil-rate band).
2. Why Is This Happening?
The government’s aim is to raise revenue and ensure that reliefs continue to support genuine farms and businesses, while targeting very large estates that currently claim unlimited relief. They describe the reform as an effort to “support sustainability of public finances” while making reliefs “fairer”.
3. What This Means for Business Owners and Farmers
A. Some families will see little change
If your qualifying business or agricultural assets fall well below £2.5 million (or £5 million for a couple), you may still benefit from full relief.
B. Others will face a new tax bill
For the first £2.5 million (or £5 million for a couple) of your qualifying business or agricultural assets will still benefit from full relief anything over this however, will be subject to inheritance tax at half the current rate. This means you will pay 20% on the value above your allowance.
C. Business sales and succession planning become more important
With full reliefs now capped, succession planning is no longer just about who takes over the business. What may previously have been a sensible approach, leaving the business to pass on at death, could now result in avoidable tax bills for families.
When providing advice to our clients who are business owners or farmers, discussions around succession planning and the options available have become more relevant and more frequent. Some clients who had no intention of transferring the business until death are now starting to explore whether transferring part or all of the business during their lifetime could be more tax-efficient.
Starting these conversations earlier can give families greater flexibility, help make better use of available reliefs, and reduce the risk of difficult decisions, or forced sales, at a later stage.
4. What can you do today
As already detailed, one of the most effective steps business owners and farmers can take is to start succession planning earlier than they might previously have considered. With reliefs now capped, leaving everything to pass on at death may no longer be the most tax-efficient option. Beginning these conversations sooner allows families to explore their options calmly, consider phased transfers or restructuring, and make better use of available reliefs and exemptions over time. Early planning also reduces the risk of rushed decisions or forced asset sales later, particularly where wealth is tied up in land or business interests rather than cash.
Another important option is ensuring there is sufficient liquidity to deal with any future inheritance tax liability. For some families, life insurance written in trust can provide a straightforward way to create a tax-free lump sum to help beneficiaries meet an IHT bill without having to sell business or agricultural assets. While this will not remove the tax itself, it can protect the underlying business or farm and give successors breathing space during what is often a difficult period. As part of a wider estate plan, this type of cover can play a valuable supporting role alongside succession and ownership planning.
5. The Bigger Picture
The April 2026 changes do not mean the end of relief for business owners, far from it.
You can still pass on:
- Up to £2.5 million of qualifying assets fully tax-free per person.
- Up to £5 million for couples plus the standard nil-rate bands.
But for families whose wealth sits mainly in their business or agricultural property, often due to land values rather than “cash wealth”, these changes could create significant unexpected tax bills.
Understanding your position now will help you avoid surprises later.
If you are impacted by these changes, as part of your ongoing financial planning, we will continue to review how these changes will impact you and provide advice on how your inheritance tax liability could be addressed.
If you have any friends, family members, or colleagues who might also benefit from understanding how their business or farm is going to be impacted by the change in the rules, please feel free to pass this information on. We’re always happy to help them review their position and explore the options available to them.
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