In her first Budget speech as Chancellor in October 2024, Rachel Reeves announced changes to Business Property Relief (BPR), which are likely to have significant tax implications for business owners and their families.

In this quick Q & A blog, we give you the answers to the BPR questions you need to know.

Q: What is Business Property Relief and why has it been so valuable?

A: BPR, along with Agricultural Property Relief, is an inheritance tax (IHT) relief that reduces, and sometimes eliminates, the taxable value of qualifying business assets that pass on death or by lifetime gift. Under today's rules, i.e. up to April 2026, you can claim up to:

  • 100 % relief on a trading business, an interest in a partnership or shares in an unlisted (including AIM-quoted) trading company.
  • 50% relief on land, buildings or machinery you own personally but use in your business.
  • 50% on a controlling shareholding in a fully listed company, provided that more than 50% of the shares are owned.

BPR can be claimed once you have owned the asset for a period of two years. The relief was introduced to help keep family firms intact rather than forcing a sale to pay Inheritance Tax (IHT).

Q: How does Business Property Relief currently benefit business owners in practice?

A: 100% relief means that provided your company is genuinely trading, its full market value can pass to the next generation free of IHT. That frees up future cash flow for investment and safeguards jobs that might otherwise be lost to an enforced sale.

Q: What did Chancellor Rachel Reeves announce in the Autumn Statement (30 October 2024)?

A: As a means of increasing the Treasury's annual tax take, the Chancellor announced that from 6 April 2026 the generosity of BPR will be curtailed with a:

  • £1 million lifetime cap: Each individual (and each relevant property trust) will still receive 100% relief on the first £1 million of combined Business and Agricultural Property.
  • 50% relief above the cap: Value above £1 million will attract only 50% relief, giving an effective IHT rate of 20%.
  • AIM and other “unquoted but listed” shares: These will qualify for 50% relief on their full value, with no access to the £1 million 100% band.
  • No spouse transfer of unused allowance: The £1 million cap is per person and is not portable between spouses or civil partners.
  • Anti-forestalling rules: Gifts made after 30 October 2024 but before 6 April 2026 are re-tested under the new regime if the donor dies within seven years of the gift.

NB. At the time of writing, in June 2025, these changes have not been ratified by parliament, so there is a slight chance that the changes may be delayed or the legislation may change before they come into effect.

Q: Will the underlying qualifying conditions for Business Property Relief change?

A: No. A business must still be trading, have been owned for at least two years, and not primarily be an investment vehicle. What is changing is the amount of relief you receive, not who can claim it.

Q: How will the new £1 million cap actually work?

A: Think of it as a lifetime running total: It covers business/agricultural assets you gift into trust, lifetime gifts to family and the value in your estate when you die.

It refreshes every seven years for lifetime gifts (mirroring the nil-rate band).

Trusts created before 30 October 2024 retain their own £1 million allowance; new trusts share a single allowance across all trusts settled after that date.

Q: How might these Business Property Relief changes hit family businesses?

A: Treasury numbers suggest only the “wealthiest” estates are targeted, yet trade bodies warn that many capital-intensive but low-profit firms will become cash-strapped just when a generational handover is already complex. Some analysts estimate that over 200,000 jobs in family businesses and farms could be at risk if owners are forced to sell assets to fund the additional 20% tax.

Q: What planning steps can business owners take before April 2026?

Assuming the rule changes to BPR and APR take effect from April 2026, here are some suggestions for steps you can take to try to reduce future IHT bills.

  • Review your estate plan early – quantify how much of the business value will still fall inside the £1 million band.
  • Consider lifetime gifts – gifting now can “freeze” the value, but beware of the anti-forestalling rules if you do not expect to survive for at least seven years.
  • Equalise ownership between spouses – each partner should ideally hold at least £1 million of qualifying assets to maximise the two allowances.
  • Trust restructuring – existing trusts may retain separate allowances; new trusts settled before 30 October 2024 already benefit from the current rules.
  • Revisit AIM/IHT portfolios – reassess whether the reduced relief still justifies the investment risk.
  • Consider alternative IHT shelters – take financial advice regarding pensions (these currently fall outside the scope of IHT until April 2027), life insurance policies written in trust, or a Family Investment Company, as these may help plug the gap.
  • Robust record-keeping and valuations – HMRC challenges on trading status or excepted assets are expected to increase. Ensure you have accurate and up to date information readily available.
  • Professional advice is essential, as each step interacts with CGT, stamp duty, corporation tax, and family governance. Consulting with an accountant, such as DWilkinson&Company, could help save you time, money, and a lot of stress.

How DWilkinson & Company can help

The team at DWilkinson&Company are already working with clients to map their exposure to the new £1 million cap. In doing so, we are working with these families to review and update their estate plans, which in some cases involves restructuring the business and working with solicitors to update Wills.

If you would like to discuss the forthcoming changes to business property relief and how it could impact your business and family, please get in touch. We offer a free initial consultation to help you get started and reduce your future Inheritance Tax (IHT) bills.

Please get in touch with us on 0113 320 0001 or email office@dwco.co.uk.