On 6 April 2026, significant changes to Business Property Relief (BPR) came into force. First announced in the October 2024 Autumn Budget, these reforms represent the most substantial change to inheritance tax relief for business owners in three decades [1].
For business owners, founders, and family enterprises, understanding what has changed and what it means for succession and governance planning is essential.
This article provides a clear overview of the key changes, their potential impact, and the practical steps business owners might consider.
Bridgehouse does not provide tax or financial advice, what we do is to support business owners with the governance and succession planning considerations that accompany changes of this nature.
The changes to Business Property Relief were announced by Chancellor Rachel Reeves in the Autumn Budget on 30 October 2024, as part of broader reforms to inheritance tax reliefs [1].
The Government’s stated intention was to ensure the inheritance tax system is “fair” while maintaining support for smaller businesses and family farms. The reforms took effect on 6 April 2026, providing businesses with approximately 18 months to prepare from the date of announcement [2].
The reforms introduced several significant changes to how Business Property Relief operates:
A £2.5 million combined allowance now applies to assets qualifying for both Agricultural Property Relief (APR) and Business Property Relief (BPR) [1][2].
Qualifying business assets up to £2.5 million continue to receive 100% relief from inheritance tax, meaning no IHT is payable on these assets [3].
Assets above the £2.5 million threshold now receive only 50% relief, resulting in an effective 20% inheritance tax rate on the excess. Previously, qualifying assets could receive 100% relief regardless of value [3][4].
Shares in AIM-listed companies and those qualifying under the Enterprise Investment Scheme (EIS) now receive a flat 50% relief regardless of value. These shares do not consume the £2.5 million allowance [2][3].
The £2.5 million allowance operates similarly to the nil rate band – any unused allowance is transferable to a surviving spouse or civil partner [3].
The £2.5m threshold is frozen until April 2031, then rises annually in line with inflation [2].
For many business owners, these changes alter the succession and estate planning landscape significantly.
Businesses with qualifying assets above £2.5 million may now face inheritance tax liabilities that were not previously anticipated. Where succession planning relied on full BPR relief, this assumption may no longer hold [4][5].
Meeting a tax liability on business assets could require the sale of shares, property, or other business assets. In some cases, it may necessitate the sale of the business itself, creating potential continuity risks [5].
Where existing plans relied on full relief, owners may need to reassess whether their intended approach remains appropriate. This could affect timing, structure, and the involvement of professional advisors [5].
Understanding the current value of business assets is more important than ever. A professional valuation provides clarity on potential exposure and informs decision-making [4].
While every situation is different, and individual circumstances require tailored professional advice, business owners may wish to consider the following:
An up-to-date valuation of business assets helps clarify potential inheritance tax exposure and provides a foundation for informed planning.
Wills, shareholder agreements, articles of association, and any existing succession documentation should be reviewed with professional advisors to ensure they remain aligned with current intentions and the new tax environment.
Where appropriate, lifetime transfers may offer a route to managing potential exposure – noting the seven-year rule for potentially exempt transfers. This requires careful consideration with qualified tax and legal advisors [5].
Life insurance or other financial products may help meet potential inheritance tax liabilities without requiring the sale of business assets. Again, this requires specialist financial advice.
Clear documentation and regular review of succession plans, including communication with family members, co-shareholders, and key stakeholders, reduces uncertainty and supports smoother transitions.
Beyond the tax implications, changes of this significance should prompt business owners to review their broader governance and succession arrangements.
Is there a clear, documented succession plan in place? Does it cover different scenarios – planned transition, sudden incapacity, or death? Is it reviewed regularly and understood by those who need to know?
Are wills, shareholder agreements, articles of association, and any family constitutions or protocols up to date and aligned with current intentions? Outdated or misaligned documentation creates risk and uncertainty.
For family businesses, clear structures for decision-making about ownership and leadership transition are essential. Family councils, shareholder forums, or governance protocols can help facilitate difficult conversations and reduce the risk of conflict.
Does the board have visibility of succession and transition risks? Is this a regular agenda item, with clear ownership and accountability? Boards play a critical role in ensuring succession planning receives appropriate attention and resources.
Have conversations taken place with family members, co-shareholders, or key stakeholders about long-term intentions? Proactive communication reduces uncertainty and helps align expectations before decisions need to be made.
Are professional advisors – tax, legal, financial, governance – working together effectively? Complex transitions benefit from coordinated advice rather than siloed input.
Good governance and clear succession planning support better outcomes, whatever the tax environment.
Bridgehouse does not provide tax or financial advice. However, for business owners reviewing their succession and transition planning, we provide expert support in the areas that matter:
Succession planning: Helping business owners develop clear, documented succession plans with appropriate governance oversight and regular review processes.
Family business governance: Supporting family businesses with governance frameworks, including family councils, constitutions, and communication protocols, that facilitate effective decision-making across generations.
Board effectiveness: Ensuring boards have the right structures, skills, and information to oversee succession and transition matters effectively.
Governance reviews: Assessing existing governance arrangements to identify gaps and opportunities for strengthening oversight of key business risks, including succession.
For support with succession planning and governance, contact us today .
We would be pleased to answer any queries or have an informal chat to discuss your possible governance needs.