2026 inheritance tax rules: changes to business property relief 

If you own a business, new Inheritance Tax (IHT) rules could have a big impact on your future plans. Here’s what you need to know now, and what you should do next.

What’s changing from April 2026?

From 6 April 2026, the rules around Business Property Relief (BPR) are changing. BPR is a tax relief offered by the government that helps business owners pass on their companies without a hefty tax bill. Right now, if you’ve owned your trading business for at least two years, you can pass it on with 100% relief—no cap.

But soon, that 100% relief will be capped at £1 million. Anything above this will only receive a 50% relief, reducing the 40% IHT levy to an effective charge of 20%.

Note than the £1 million cap due to come into effect is individual, not transferable between spouses or civil partners. Any allowance unused upon death cannot be transferred to the other person.

For many families, these changes overall could mean a sudden, unexpected tax bill, and in some cases, it could threaten the future of the business itself.

Why does this matter to business owners?

If your business is worth more than £1 million, your family could face a significant tax bill when you pass it on. Without strategic planning, some businesses may not survive this transition.

Example under the new rules from 6 April 2026:

• Business value: £ 3 million
• Relief: 100% up to £1 million, 50% for the remaining £2 million
• Inheritance tax due: £2 million * 40% * 50% = £400,000

The nature of a tax bill like this would require serious liquidity in the business to meet such tax liabilities. The good news is that there are steps that can be taken in your succession planning.

What can you do?

Act now to protect your business and your loved ones. Here are some practical steps:

• Talk to your advisors: Get expert advice on how the changes affect you.
• Consider succession planning: Explore options like restructuring or other tax-efficient strategies.
• Make use of lifetime gifts: You can gift shares to your spouse and or children, but be aware of risks like loss of control or complications from divorce and take advice on how to protect against this.
• Trusts and Family Investment Companies: These are popular ways to manage succession and protect your business.
• Review your wills: Each spouse has a separate £1 million allowance, but it’s not transferable. Make sure your wills are set up to use both allowances alongside the nil-rate band, so you don’t miss out.

Key dates for 2026 IHT changes

• 30 October 2024 – 5 April 2026: Transitional period under which lifetimes transfers made into trust retain the current full 100% relief rules.
• 6 April 2026: New BPR cap and 50% rules come into effect.
• Ongoing: HMRC guidance and updates to follow which you can stay abreast of here.

Don’t wait—the clock is ticking

The new rules come into effect in April 2026. Waiting could mean higher taxes and more stress for your family. Our team at Napthens is here to help you navigate these changes and secure your business’s future.

Stay tuned: In the coming weeks, our experts will share more advice on wills, trusts, and family investment companies. If you think these changes might affect you, get in touch now —don’t leave it too late.

Watch our podcast on April 2026 IHT changes