Answers · UK 2025/26
How does Business Property Relief reduce Inheritance Tax in 2026/27?
BPR reduces the IHT value of qualifying business assets: 100% relief for unlisted trading company shares, sole trader businesses and partnership interests; 50% for listed controlling shareholdings and business-used land. Assets must be owned for 2 years. From April 2026, a combined BPR+APR cap of GBP 1M applies -- assets above this get only 50% relief.
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Business Property Relief (BPR) is a relief from Inheritance Tax (IHT) that reduces (or eliminates) the taxable value of qualifying business assets in an estate. It is one of the most significant IHT planning tools available. Rates of relief 100% BPR (the asset is fully excluded from the estate): -- Shares in an unlisted trading company (including AIM-listed shares, which are treated as unlisted for this purpose) -- An interest in an unincorporated business (sole trader or partnership) -- Holding company shares where the group is a trading group 50% BPR: -- Shares giving a controlling interest in a listed company -- Land, buildings or plant and machinery used wholly or mainly for the purposes of a business carried on by a company you control, or by a partnership of which you are a partner Ownership requirement The asset must have been owned for at least 2 years before death (or the lifetime transfer). There is an exception where business property replaces other qualifying business property -- the combined periods can be aggregated. Budget October 2024 reform -- effective April 2026 The government announced that from 6 April 2026, the combined BPR and Agricultural Property Relief (APR) 100% rate will be capped at GBP 1,000,000 per estate. Business and agricultural assets above this GBP 1M threshold will only attract 50% relief (meaning an effective 20% IHT rate on the excess rather than 0%). AIM shares: continue to qualify but are now subject to the GBP 1M cap alongside other business assets. Exclusions from BPR BPR does not apply to: -- Investment businesses (property investment, holding investment portfolios) -- Excepted assets (cash and investments not used in the business) -- Binding contracts for sale at the date of death IHT payment by instalments Where BPR is insufficient to eliminate the IHT, estates may be able to pay IHT on business assets in 10 annual instalments (interest-free in some cases), preserving the business for trading continuation.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.