The April 2026 IHT Reforms: What Business Owners and Farmers Need to Know Now

Business Property Relief (BPR) and Agricultural Property Relief (APR) offered a near-complete shield against inheritance tax for qualifying business and farm assets before 6 April 2026. Since that date, the protection is subject to the combined allowance described below. If you own a private business, farmland, agricultural property, or AIM-listed shares, these are significant inheritance tax changes to understand.

This guide explains exactly what is changing, who is affected, what your potential liability could be, and — critically — what you should be doing before the window closes.

What Are Business Property Relief and Agricultural Property Relief?

Business Property Relief (BPR) reduces the value of certain business assets for inheritance tax purposes. Qualifying assets — such as shares in an unlisted company, interests in a partnership, or business property used in a trade — can attract 100% relief within the combined allowance, meaning that portion passes outside your estate for IHT purposes.

Agricultural Property Relief (APR) works similarly for agricultural assets — farmland, farm buildings, and in some cases farmhouses. Qualifying assets can attract 100% relief within the allowance, subject to the relevant conditions.

These reliefs were designed to prevent the forced break-up of family businesses and farms to pay inheritance tax. Since 6 April 2026, the 100% relief is subject to the combined allowance.

What Changed on 6 April 2026?

The 100% rate of BPR and APR relief will be capped at a combined total of £2.5 million per person across all qualifying assets. Qualifying assets above that £2.5 million threshold will attract only 50% relief. Since IHT applies at 40% to the half that is not relieved, the effective tax rate on the excess becomes 20%.

Worked Example: A £5 Million Farm Under the Current Rules

For larger farms and businesses, the liability scales accordingly. A qualifying business worth £10 million would face a potential IHT charge of approximately £1.5 million on the assets above the cap. And unlike a share portfolio, business owners and farmers generally cannot sell a fraction of the enterprise to cover the bill.

Six Key Changes You Need to Understand

1. The £2.5 Million Cap Is a Single Combined Allowance

The £2.5 million threshold applies to the combined value of all BPR and APR qualifying assets — it is not a separate allowance for each relief type. A farmer who also owns shares in a family trading company, for example, must count both asset types against the same £2.5 million cap.

2. Married Couples Can Combine — But Only With Planning

The unused portion of the £2.5 million allowance is transferable to a surviving spouse or civil partner, mirroring how the nil rate band works. In principle, married couples could shelter up to £5 million of qualifying assets between them. However, this only works if the allowance is actually preserved and transferred correctly. A will that leaves everything to a spouse without structuring may waste the first spouse's full allowance — a costly mistake on larger estates.

3. AIM Shares Lose Their Full IHT Protection

Shares on AIM and similar unrecognised stock exchanges previously attracted 100% BPR, making AIM portfolios a widely-used inheritance tax planning strategy. From April 2026, AIM shares will receive only 50% relief. Investors who built IHT-efficient portfolios using AIM-qualifying shares need to reassess their strategy now — and consider whether alternative approaches are available.

4. Gifts Made After October 2024 Are Caught by the New Rules

This is one of the most significant — and least widely understood — aspects of the reforms. If you transferred BPR or APR qualifying assets on or after 30 October 2024, and you die on or after 6 April 2026, the new rules apply to that gift. The widely-held expectation that gifts made before the commencement date would be fully protected has been explicitly removed. Anyone who gifted qualifying assets after that date should take specialist advice urgently.

5. Existing Trusts Are Not Protected

Both newly established and existing relevant property trusts will have their own £2.5 million cap for 100% relief. Furthermore, new anti-fragmentation rules prevent assets from being split across multiple trusts in order to multiply the cap — an approach that some had considered as a planning strategy. The legislation has been written specifically to close this route.

6. Pension Pots Enter the Estate from April 2027

Looking slightly further ahead: from April 2027, most unused pension pots will be brought within the estate for inheritance tax purposes. This is a separate but equally significant reform. Many business owners and farmers held pension wealth specifically because it sat outside the estate. From 2027, that advantage disappears — adding a further layer of potential liability for estates already facing BPR/APR capping. See our full guide to the Budget 2025 IHT changes for more on this.

Why Business Owners and Farmers Face a Unique Risk

The £2.5 million cap sounds large in isolation. For farming families and private business owners, it is not. A working farm of modest size, a commercial property let to a trading business, or a private company with retained profits can easily reach — and exceed — this threshold without being a headline-grabbing enterprise.

The deeper risk is illiquidity. A family with significant wealth tied up in farmland or a private business may have very little in liquid assets — cash, publicly traded shares, or other readily realisable investments. When an IHT bill arrives, you cannot simply sell 10% of a farm or 15% of a closely-held company to raise the funds. The likely outcome is a forced sale of the whole, or significant debt financing.

This is the practical consequence behind the headline numbers: farms and businesses that took generations to build being partially disposed of to meet a tax liability that, under the previous rules, would not have existed. The families most at risk are not those with the most sophisticated advisers — it is those who always assumed relief would protect them and have never needed to actively plan around it.

What You Should Do Now

Step 1: Quantify Your Exposure

Start by identifying all assets that currently qualify for BPR or APR. Add them up and assess how much falls above the £2.5 million cap. Apply the 20% effective rate to the excess to get an approximate figure. Then consider the rest of your estate — the nil rate band, residence nil rate band, and any other reliefs may reduce the final bill. Our free IHT calculator can help you build this picture quickly.

Step 2: Review Your Will Immediately

Any will or estate plan written on the assumption of unlimited BPR and APR protection needs to be revisited. In particular, a simple spouse-to-spouse transfer of everything may waste the first spouse's £2.5 million allowance entirely. A specialist solicitor can restructure your will to ensure both allowances are preserved and used efficiently. For estates above the cap, this single step could save a significant sum.

Step 3: Consider Lifetime Gifts — Carefully

Qualifying assets gifted before 6 April 2026 may be subject to transitional treatment, depending on the facts and the date of death. The gift must also be genuine — legal ownership must transfer completely — and the seven-year clock begins from the date of the gift. If the donor dies within seven years, the gift is a potentially exempt transfer and may fall back into the estate. Anyone considering this route needs specialist advice.

Step 4: Plan for Liquidity

If your estate will face an IHT charge on assets above the cap, consider how that bill will be paid. Options include life insurance written in trust (specifically whole-of-life policies designed to cover an IHT liability), structured lifetime gifting programmes, or asset restructuring to reduce the qualifying value within the estate. Each approach has different implications and costs — a specialist adviser can help you identify the right combination.

Step 5: Do Not Wait

The decisions that will matter most — lifetime gifts, will restructuring, trust planning, liquidity arrangements — all require time to implement correctly, and some have legal minimum timeframes. Solicitors and advisers specialising in this area are already reporting significantly increased demand ahead of the April 2026 deadline. The later you leave it, the fewer options you will have.

Frequently Asked Questions About the April 2026 BPR and APR Changes