What Is Changing and Why It Matters
From 6 April 2026, the rules around Inheritance Tax (IHT) Business Property Relief (BPR) and Agricultural Property Relief (APR) are changing significantly. For small business owners who have spent years building a company with the intention of passing it on to the next generation, this reform could have serious financial consequences — and time to act is running out.
Until now, qualifying business assets have benefited from up to 100% IHT relief, meaning that in many cases a family business could be passed on entirely free of Inheritance Tax. From 6 April, that changes.
The New Rules Explained
Under the reformed rules, 100% Business Property Relief will only apply to the first £2.5 million of combined qualifying business and agricultural property. Any value above that threshold will attract relief at just 50%, meaning the remaining 50% will be subject to Inheritance Tax at the standard 40% rate.
To put that in plain terms: if your business is valued at £4 million, the first £2.5 million remains fully relieved. The remaining £1.5 million receives only 50% relief, leaving £750,000 exposed to IHT. At 40%, that is a tax bill of £300,000 that your estate, or your beneficiaries, will need to find.
For many small business owners, that money simply does not exist as liquid cash. The business is the asset. And that is precisely why this reform is so dangerous without proper planning.
Who Is Most at Risk?
This change will affect small business owners across a wide range of sectors, but those most exposed include:
- Family-owned businesses where the majority of personal wealth is tied up in the value of the company, with little in the way of separate liquid assets.
- Farming families who hold both business and agricultural property, as the £2.5 million cap applies across BPR and APR combined, not separately.
- Business owners in growth sectors where rising valuations have pushed company values well beyond the £2.5 million threshold.
- Sole directors of limited companies who own shares in a business that qualifies for BPR but have not reviewed their succession arrangements in recent years.
How Everett King Can Help
At Everett King, we work with small business owners across the UK to ensure their businesses are structured in the most tax-efficient way possible — not just for today, but for the long term. Our advisers have a detailed understanding of the reformed BPR and APR rules and can work with you and your legal advisers to develop a succession and IHT planning strategy that protects what you have built.
Whether you are just beginning to think about succession planning or you have existing arrangements that need to be reviewed in light of the April 2026 changes, we are here to help. The sooner you act, the more options you have.
