Upcoming Changes to APR and BPR: Time to Rethink Your Estate Planning?

If you’re a business owner or farmer with valuable trading assets, changes to Inheritance Tax (IHT) rules are will have a significant impact on your estate planning. The October 2024 Budget introduced major reforms to Business Property Relief (BPR) and Agricultural Property Relief (APR)—two essential tools used to protect family businesses and farms from large inheritance tax bills.

These changes take effect from 6 April 2026. With less than a year to go, now is the time to take action.

What’s Changing?

Currently, BPR and APR can provide up to 100% relief from IHT, effectively allowing many business and agricultural assets to be passed down without triggering a tax bill. This unlimited relief has been a cornerstone of succession planning for many years.

However, from April 2026, this relief will be capped:

• 100% relief will be available on only the first £1 million of qualifying assets of business property and agricultural property combined.

• Assets above that threshold will receive 50% relief, leaving the rest potentially exposed to IHT at a rate of 20% on death.

Why This Matters to You

This change could result in a significant and unexpected tax bill for families with valuable businesses and/or farming assets.

An example:

If you and your spouse each hold £1.5 million in qualifying assets and your will passes all assets to the surviving spouse on the first death, you risk wasting one of the £1 million allowances as the new relief is not transferrable between spouses. This could cost your family up to £200,000 in additional tax.

What You Should Be Thinking About

1. Your Will

If your Will currently passes all APR/BPR assets to your spouse or civil partner, consider revising it. Directly passing some qualifying assets to your children on first death may help preserve both £1 million allowances.

2. Trusts Face New Limits

A trust is a legal arrangement where assets are held by one or more people (trustees) for the benefit of others (beneficiaries). Trusts are often used to protect family wealth, manage succession, or pass on business or farming assets in a tax-efficient way.

Under the new rules:

• Trusts created before 30 October 2024 will each receive their own £1 million APR/BPR allowance.

• Trusts created on or after 30 October 2024 by the same person (settlor) will need to share a single £1 million allowance.

This means that business or agricultural assets held in trust above the £1 million threshold may now face Inheritance Tax charges every 10 years, known as the 10-year (or periodic) charge, which is a tax of up to 6% on the value of trust assets that exceed the available relief. Previously, these assets often qualified for full relief and avoided this charge.

3. Lifetime Gifting Becomes More Attractive

Gifting qualifying business or agricultural assets during your lifetime, known as potentially exempt transfers (PETs), could now be one of the best ways to reduce your estate’s IHT exposure, provided you survive 7 years after making the gift.  However, there has been much speculation that this 7 year rule could be targeted and increased.

These gifts:

• Still qualify for full BPR/APR, with no tax on gifting.

• Your loved ones may benefit from taper relief if you survive at least 3 years.

• May also avoid capital gains tax under holdover relief

• However, you need to be aware that any asset you give away but still benefit from is still treated as forming part of your death estate.

We strongly recommend:

• Reviewing your Will—especially if you’re married or in a civil partnership.

• Valuing your business or agricultural assets to understand your IHT exposure.

• Exploring gifting opportunities and trust restructuring as soon as possible

• Working with us to build a plan that preserves as much wealth as possible for future generations.

Working Together to Protect Your Estate

At Shepherd Partnership we are already working with clients to update their estate plans in response to these changes. If you hold business or agricultural assets worth over £1 million, please get in touch.

Taking action today could prevent a significant tax liability tomorrow