From April 2026, the rules around Business Property Relief (BPR) will change. Following the government’s announcement on 23 December 2025, the proposed 100% inheritance tax (IHT) relief allowance for qualifying business assets has increased to £2.5 million per person, up from the £1 million originally announced.

In practical terms, this means that individuals can pass on up to £2.5 million of qualifying business interests free of IHT — or £5 million between spouses or civil partners. Any qualifying value above this cap will attract only 50% relief, resulting in an effective IHT charge of 20% on the excess.

While the increase is a welcome improvement on the 2024 Budget proposals, the post-April 2026 regime remains materially more restrictive than the current rules. For many business owners, the question is simple: are you actually safe?

Who benefits — and who doesn’t?

Owners of mid-sized trading businesses may find that the higher allowance keeps them fully sheltered from IHT, provided they have a well-structured and properly implemented succession plan.

However, where personally held qualifying business assets exceed £2.5 million, a meaningful IHT exposure remains — one that requires careful planning if business stability and control are to be preserved.

Government data published before Christmas suggests that only around one third of estates expected to rely on BPR alone are now fully protected under the £2.5 million allowance, compared with the previously proposed £1 million limit.

Perhaps more revealing is where the Exchequer expects to raise revenue. According to figures published by HM Revenue & Customs, in the 2022/23 tax year estates with BPR claims exceeding £2.5 million accounted for just 6% of claims, yet represented around 60% of the total value of BPR claimed — close to £2 billion in total.

The bigger the business, the smaller the benefit

For owners of substantial shareholdings, the increased allowance may feel underwhelming. By way of example:

An individual holding qualifying shares worth £10 million would, under the original £1 million cap, have faced an IHT charge of approximately £1.8 million (assuming no other reliefs or exemptions). Under the revised £2.5 million cap, that liability reduces only to around £1.5 million.

In short, the larger the holding, the less impactful the increase becomes.

Without appropriate planning, this can create a significant liquidity problem on death, increasing the risk of forced share sales and an unintended loss of control.

What should business owners be doing now?

Whether or not you expect to fall within the new allowance, sensible planning is essential. Business owners should consider:

• Reviewing their Will to ensure BPR is properly captured and not inadvertently wasted.

• Revisiting their wider estate plan, including lasting powers of attorney and any prenuptial or postnuptial arrangements, to ensure alignment with business succession objectives.

• Quantifying potential IHT exposure under the new rules and exploring mitigation strategies — such as gifting, restructuring, or changes to investment strategy — alongside funding options. Any planning should be implemented before April 2026.

• Carefully testing whether BPR actually applies to the business interests in question before relying on it.

• Reviewing corporate governance documents to ensure they support both personal and commercial succession planning.

• Ensuring professional advisers are properly coordinated when designing and implementing any strategy.

Final thoughts

The uplift in the BPR allowance is undoubtedly positive. But for business owners with qualifying interests worth more than £2.5 million, it is far from a complete solution. The effective 20% IHT charge on value above the cap can still be significant — and it demands proactive, well-considered planning now, not later.

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