The threshold for 100% relief under Business Property Relief (BPR) and Agricultural Property Relief (APR), which the government had previously announced would be £1 million per estate, is to now be set at £2.5 million per estate, effective from 6 April 2026. This change was quietly announced by HMRC through a press release on their website on 23 December 2025. This represents another awkward U-turn for the government in terms of its strategy around tax policy, but one which will be welcomed by business owners and farmers alike.
For family-owned businesses and estates, this change offers greater protection from Inheritance Tax (IHT) than was originally anticipated, following the October 2024 Budget. However, the announcements may frustrate those families who have already set plans in place to deal with their succession planning, in the expectation of a £1m allowance being introduced.
What the change means in practice
From 6 April 2026, the first £2.5 million of BPR and APR qualifying assets should receive full IHT relief, with any value above that eligible for 50% relief. Spouses and civil partners can combine their allowances, meaning a couple could pass up to £5 million of qualifying assets free of IHT, on top of the usual nil-rate bands.
There are also set to be provisions where the death of one party to a marriage occurred before 6 April 2026. In those circumstances, it is envisaged that the survivor’s estate will be able to benefit from a “transferable” allowance of £2.5m – effectively meaning that widowers are no worse off in terms of the allowance they would be entitled to compared to a married couple where both parties are still alive.
The £2.5m allowance also applies to assets held in trusts for the purposes of calculating the 10 year anniversary charges. For business/agricultural assets held in trusts, the value of which is over £2.5 million, 50% relief will apply and IHT will be due on the excess at rates of up to 6%.
Who benefits most
This increase is particularly relevant for family-owned businesses where:
- Business assets make up a significant proportion of the estate
- Multiple generations are involved in ownership or management
- The estate has grown over time and is likely to exceed the previous £1 million cap
Why planning is still crucial
Even with the higher allowance, estates above £2.5 million may still face some exposure. Now is an ideal time to:
- Review business and family asset structures
- Consider whether lifetime gifting or intergenerational transfers are still appropriate given the increase in headroom – is it better to hold on to assets and benefit from a tax free CGT uplift on death, for example?
- Factor future business growth and succession plans into estate planning
Planning ahead ensures family businesses can pass on wealth efficiently while maintaining control and continuity.
Key takeaway
The higher APR and BPR thresholds present a welcome change to what the government were originally proposing.
Whilst many estates may will now be fully covered by IHT reliefs (in the context of business/agricultural assets), careful planning remains important for higher-value businesses, businesses which are likely to increase in value, or complex family arrangements to make the most of the relief and protect family wealth.
For guidance on how these changes affect your family business or estate, contact Roger Phillips to review your succession and estate planning ahead of April 2026.
