Do the 2026 changes to Business Property Relief (BPR) or Agricultural Property Relief (APR) affect you?
APR and BPR are at the heart of the Inheritance Tax (IHT) planning strategies of many owner-managed and family businesses. APR applies to assets such as farmland, agricultural buildings and farmhouses. BPR applies to business assets including shares in companies, trading businesses, and certain machinery and land used for trading purposes.
Historically it has been possible to get 100% relief on qualifying APR and BPR assets, without any limit on value. This has now changed.
What are the changes to APR and BPR from April 2026?
From 6 April 2026 it is only possible to get 100% on the first combined £2.5 million of qualifying APR & BPR assets, and 50% relief on any amount above that. However, although 100% relief is not available on all assets, the allowance can be transferred to a surviving spouse or civil partner. Any spouse or civil partner who died before April 2026 can still have their allowance transferred.
The new rules apply to someone’s estate when they die, but also to trusts and lifetime gifts. Another change is that any IHT payable on APR and BPR assets can be paid using an instalment option which will be interest free over ten years.
How do the new rules apply to previously made lifetime gifts?
Tax planning always requires joined up thinking. Many business people who were ready to do so made lifetime gifts of assets that qualified for 100% APR or BPR relief ahead of the 2024 Autumn Budget in anticipation of possible changes in the IHT regime.
The key to effective lifetime giving is that the donor has to survive for a further seven years after making the gift before it becomes tax-exempt. This is known as a Potentially Exempt Transfer (PET). So, for instance, if someone made a gift in 2025 of an asset which would at that point have been eligible for APR or BPR relief at 100%, but they die in 2027, the gift will be regarded as a failed ‘Potentially Exempt Transfer’ and the first £2.5 million will be tax-free but the balance will only attract 50% relief.
The PET allowance allocation resets every seven years. So, for example if you give £2.5 million of your farming business to your son in May 2026, you would need to wait until May 2033 before making further lifetime gifts which would qualify for tax relief.
What should you consider next?
Traditionally many farmers and other business owners retained control of their assets because no IHT or Capital Gains Tax (CGT) would be due when they died. This has now changed and succession planning is more important than ever before in any type of family business. Trusts can play an important part in succession planning for some businesses, but this needs to be thought through carefully and discussed with your professional advisers.
If you are starting to explore succession planning in relation to your family business and would like to talk to us, contact Seema Solanki in our Ely office, Rebekah Crockford in Wisbech or Danielle Dennis-Betts in King’s Lynn.
How To Contact Us:
To contact a member of our team, you can fill in our online enquiry form, email info@fraserdawbarns.com, or call your nearest office below. If you’d like to speak to a member of our team at one of our offices across Norfolk and Cambridgeshire, visit our offices page.
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This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek advice specific to your own circumstances. Fraser Dawbarns LLP is always happy to provide such advice.