With just one year to the day remaining before the 6 April 2026 reforms to Business Property Relief (‘BPR’) take effect, trading business owners must take proactive steps to safeguard their assets and minimise their inheritance tax (‘IHT’) exposure. The upcoming changes will significantly alter the relief available, particularly for those with substantial business interests. Understanding these reforms and implementing strategic planning now can make the difference between preserving wealth and facing unexpected and vastly increased tax liabilities.
What are the key changes to BPR
The 2024 Autumn Budget introduced a £1 million cap on the 100% relief available for business and agricultural property. Previously, qualifying business assets could receive full exemption from IHT, but under the new rules:
- The first £1 million of combined agricultural and business property will still qualify for 100% relief.
- Any value above £1 million will only receive 50% relief, increasing the IHT burden.
- AIM-listed shares, which previously qualified for 100% relief, will now only receive 50% relief, regardless of value.
- The £1 million allowance is per individual, meaning married couples or civil partners can benefit from £2 million collectively.
These changes will impact succession planning, particularly for owners of high-value trading businesses who previously relied on full BPR to pass assets tax-free.
Why business owners must take action now
With just one year to go, trading business owners must review their estate and succession plans to ensure they are optimising relief under the new framework. Here’s why immediate action is essential:
1. Increased IHT Exposure
For businesses exceeding the £1 million threshold, the effective IHT rate will rise to 20% on the excess value. This could result in substantial tax liabilities for heirs, potentially forcing the sale of business assets to cover costs.
2. Succession Planning Adjustments
Business owners must reassess ownership structures to maximise relief. Options include:
- Transferring shares to family members before the new rules take effect.
- Restructuring ownership to ensure assets are divided strategically across multiple individuals.
- Utilising trusts to manage tax-efficient transfers.
3. Valuation and Compliance
Accurate business valuations are now more critical than ever. Owners should:
- Conduct a formal valuation to determine their exposure under the new rules.
- Identify excepted assets that may not qualify for relief.
- Ensure compliance with trading activity requirements, as investment-focused businesses may not qualify.
4. Reviewing AIM Investments
For those holding AIM-listed shares, the reduction in relief from 100% to 50% means re-evaluating investment strategies. Business owners may need to diversify holdings or consider alternative tax-efficient structures with the appropriate investment advisor.
Final Thoughts
The April 2026 BPR reforms mark a major shift in IHT planning for trading business owners. With just one year remaining, proactive steps must be taken to review valuations, restructure ownership, and optimise relief. Failing to act now could result in significant tax liabilities, jeopardising business continuity and family wealth.
Business owners should seek professional tax advice to navigate these changes effectively and ensure their estate planning aligns with the new regulations.
Would you like assistance in drafting a strategy tailored to these changes? Let’s make sure you’re fully prepared by reviewing your position with Trusted Tax Advice. Contact us on 07478 263 272 or email us at info@trustedtaxadvice.co.uk for more information.
