How the recent changes to Business Property Relief (BPR) may impact you

Introduction of a £1 million allowance

Effective from 6 April 2026, the 100% BPR rate will be capped at £1 million per individual. Any qualifying business assets exceeding this threshold will receive a reduced relief rate of 50%. This change will particularly impact owners of larger companies with significant business assets, requiring a review of corporate structures and tax planning strategies.

Reduction of relief for Alternative Investment Market (AIM) – listed shares

Previously, shares listed on the Alternative Investment Market (AIM) qualified for 100% BPR, offering a significant IHT advantage. However, under the new rules, AIM-listed shares will now only qualify for 50% relief, regardless of their value. This adjustment will impact investment strategies, particularly for those individuals that have relied on AIM-listed shares as a tax-efficient asset class.

Impact on trusts

For relevant property trusts, each trust will have its own £1 million allowance for assets qualifying for 100% relief on each 10-year anniversary charge or exit charge. However, trusts established after 30 October 2024 by the same settlor must share this allowance, which could complicate tax-efficient business succession planning.

Increased IHT liability

Individuals holding business assets exceeding the £1 million threshold will face a higher IHT liability due to the reduction in relief from 100% to 50% on any excess value. This means that business owners and shareholders must reassess their tax planning strategies.

Business succession planning challenges

The revised BPR rules necessitate a thorough re-evaluation of succession plans, particularly for those who have structured their business ownership to maximise BPR benefits. Business owners may need to explore alternative strategies, such as restructuring ownership for tax efficiency.

Trust arrangements

Business owners who use trusts as part of their succession planning must review these structures to determine how the shared £1 million allowance for trusts will affect them. This will be particularly important where 10-year anniversaries are due to arise soon after 6 April 2026 or where exits from the trust are expected.

For businesses involved in agriculture and rural enterprises, the proposed changes also impact Agricultural Property Relief (APR). The new £1 million allowance is shared between BPR and APR, meaning owners of agricultural business with high-value land and agricultural assets should carefully assess their tax planning to ensure maximum tax efficiency.

Given the significant changes to BPR, it is essential for business owners, investors, and trustees to consult with their tax advisers as soon as possible. A proactive approach will help ensure that business succession and tax planning remain effective and compliant with the new rules.

By reassessing corporate structures, reviewing trust arrangements, and considering alternative IHT mitigation strategies, business owners can adapt to these changes and minimise their potential tax burden.

For personalised advice on how these changes may affect you, speak to a tax specialist from Old Mill to secure the most tax-efficient solutions under the new BPR framework. Contact us here.