Background
The Government, just before Christmas, announced a major U-turn on the change to the threshold for Inheritance Tax (IHT) Business Property Relief (BPR) and Agricultural Property Relief (APR) previously announced in the Autumn 2024 Budget and set out in our Muras Matters of 4 August 2025 ‘Government Confirms Changes to Inheritance Tax Reliefs’. The change has been widely welcomed following the concerns of business owners and farmers and the campaign against the original proposals.
The threshold for the 100% rate of relief has now been increased to £2.5 million, rather than the reduced £1 million that was previously announced to take effect from 6 April 2026. A 50% rate of relief will apply above this £2.5 million threshold.
The change also means that couples will now be able to pass on up to £5 million of agricultural or business assets between them inheritance tax-free. We are reminding readers of this change as there are tax planning opportunities to pass business assets on, which are available up until the rule change on 6 April 2026.
Detail
From 6 April 2026, the first £2.5 million of combined qualifying agricultural and business property will continue to receive 100% inheritance tax relief, but as previously announced in the Autumn Budget the rate of relief on assets which currently qualify for 100% BPR or APR will be reduced to 50%, over and above this first £2.5 million. The increased allowance will be available to both individuals and trusts. As previously announced the rate of relief on shares listed other than on a ‘recognised stock exchange’ will also be reduced from 100% to 50%. This includes shares listed on the Alternative Investment Market (AIM).
From 6 April 2026, 100% BPR and APR will be subject to the allowance that refreshes every 7 years for individuals (10 years for trusts).
The increase in the threshold follows earlier concessions made by the government, including making the allowance transferable between spouses or civil partners. Originally in the Autumn 2024 Budget it had been announced the allowance would not, to the extent unutilised, be transferrable to a spouse or civil partner.
Increasing the allowance to £2.5 million means that married couples or civil partners will broadly be able to benefit from BPR and APR of up to £5 million, on top of other allowances, including the nil rate band. While this is a very welcome increase, individuals with business assets in excess of £2.5 million (or £5 million for a married couple) will see their potential IHT exposure increase from 6 April 2026. For those people there are still tax planning opportunities to pass their business on prior to the change, which require consideration.
If you have any concerns regarding BPR or APR, or would like any advice on how any of the points raised above could impact you, or alternatively would like to discuss any of the issues above then please contact our Tax Director, Jenny Marks.
To see our other news items please visit our Muras Baker Jones – Blog.