New £1 Million Combined BPR/APR Allowance (From April 2026) vs Pre-2026 Unlimited Relief
From 6 April 2026, Business Property Relief (BPR) and Agricultural Property Relief (APR) at the full 100% rate are capped at a combined £1 million per estate, with only 50% relief available above that threshold. Before this reform, 100% relief on qualifying business and agricultural assets was unlimited in value. This guide compares the new regime with the previous rules for estate planning purposes.
Key facts for 2026/27
- The reform was announced in the Autumn Budget 2024 and took effect from 6 April 2026, meaning it applies to deaths and relevant lifetime transfers from that date onward, which is the current tax year at the time of writing.
- Under the new rules, the first £1 million of combined qualifying Business Property Relief and Agricultural Property Relief assets in an estate can still receive 100% relief from Inheritance Tax; value above that combined £1 million allowance generally attracts only 50% relief, meaning the excess is effectively taxed at half the standard 40% rate.
- Shares in AIM-listed and other similar qualifying unlisted trading companies, which previously often qualified for 100% Business Property Relief with no cap, are also affected by parallel reforms restricting the relief available on this category of asset — confirm the current specific treatment of AIM shares at gov.uk, as the mechanics are more detailed than this comparison covers.
- The standard Inheritance Tax nil-rate band remains £325,000 and the residence nil-rate band remains £175,000 for 2026/27, both still frozen, and both apply independently of, and in addition to, any Business or Agricultural Property Relief available on an estate.
- The standard Inheritance Tax rate remains 40% (36% where at least 10% of a qualifying net estate is left to charity) — the new 50% relief above the £1 million combined BPR/APR allowance effectively creates an intermediate 20% rate on the excess value, rather than removing relief altogether.
Side-by-side comparison
| Feature | From April 2026 (£1m Combined Allowance) | Pre-April 2026 (Unlimited Relief) |
|---|---|---|
| Relief on first £1m of combined qualifying BPR/APR assets | 100% relief — no Inheritance Tax due on this value | 100% relief — no Inheritance Tax due (no £1m limit existed) |
| Relief on qualifying assets above £1m combined | 50% relief only — effective 20% IHT rate on the excess | 100% relief — no Inheritance Tax due regardless of value |
| Cap shared between spouses/civil partners | Each individual has their own £1m allowance — not transferable between spouses in the way the nil-rate band is | Not applicable — no cap existed |
| AIM-listed qualifying shares | Affected by parallel restrictions to the relief available — check current specific treatment | Often qualified for full 100% relief with no cap |
| Standard nil-rate band and RNRB | Still available in addition — £325,000 NRB + £175,000 RNRB, frozen for 2026/27 | Still available in addition — same NRB/RNRB structure |
| Effect on large family businesses and farms | Estates with qualifying assets well above £1m now face a real, calculable IHT liability on the excess | Large qualifying estates could pass on entirely free of IHT on the business/farm value |
| Planning options | Life insurance, trusts, lifetime gifting and business structuring have all become more relevant to manage the excess above £1m | Less pressure to plan around a cap, since none existed |
Why the £1 million combined allowance was introduced
Before this reform, Business Property Relief and Agricultural Property Relief could each provide 100% Inheritance Tax relief on qualifying assets with no upper monetary limit, meaning a family business or farm of any size could, in principle, pass to the next generation entirely free of Inheritance Tax provided the qualifying conditions (ownership period, trading status, and so on) were met. The government's stated rationale for capping the 100% relief at a combined £1 million from April 2026 was to raise revenue while, in its view, still protecting most typical family farms and small and medium-sized businesses, which it judged would generally fall within the new allowance.
The reform is significant because it ends decades of essentially unlimited relief for the largest qualifying estates, introducing for the first time a real, calculable Inheritance Tax exposure for family businesses and farms whose qualifying assets exceed the new £1 million combined threshold — a threshold that some agricultural and business representative bodies have argued is too low relative to modern farm and business asset values, particularly land prices.
Because this is a complex, actively-debated area of tax policy with detailed transitional and anti-avoidance rules that go beyond a simple headline figure, this comparison deliberately keeps to the high-level structure of the change. Anyone with a qualifying business or agricultural estate anywhere near the £1 million combined threshold should get current, specific advice from an estate planning specialist rather than relying on general commentary.
Illustrating the impact for a qualifying estate above £1m
Consider, purely for illustration, a farm or trading business valued at £3 million that fully qualifies for Agricultural or Business Property Relief. Under the pre-April 2026 rules, the entire £3 million could receive 100% relief, meaning no Inheritance Tax at all was due on that value (subject to meeting the qualifying conditions).
Under the rules from April 2026, the first £1 million receives 100% relief as before, but the remaining £2 million receives only 50% relief, meaning £1 million of that remaining value is treated as chargeable to Inheritance Tax at the standard 40% rate — an Inheritance Tax liability of £400,000 that would not have arisen under the old rules, before even considering the separate nil-rate band and residence nil-rate band available against the rest of the estate.
This example is illustrative only and does not account for other reliefs, the availability of the nil-rate band and residence nil-rate band against non-qualifying assets, or specific anti-avoidance and transitional provisions that may apply to a real estate — a qualified adviser should always model an individual estate's actual position.
Estate planning implications of the new cap
Families and business owners with qualifying assets likely to exceed the £1 million combined allowance now have a strong incentive to review their estate planning, where previously the unlimited relief meant little or no Inheritance Tax planning was needed around business or agricultural assets specifically.
Common planning responses being discussed by advisers include life insurance policies written in trust to cover the potential Inheritance Tax liability on the excess above £1 million, restructuring ownership across family members or generations to make fuller use of each individual's own £1 million allowance, and earlier lifetime gifting of qualifying assets (subject to the normal 7-year rule for gifts to be fully outside the estate).
Because the reform interacts with other Inheritance Tax rules — the standard nil-rate band, the residence nil-rate band, lifetime gifting rules, and the separate restrictions affecting AIM-listed shares — anyone affected should treat this as a whole-estate planning question for a qualified professional, not a single figure to plan around in isolation.
Verdict
The move from unlimited 100% Business and Agricultural Property Relief to a combined £1 million allowance from April 2026 is one of the most significant Inheritance Tax reforms in years for owners of larger qualifying businesses and farms, introducing a real, calculable tax liability where none existed before.
Estates whose qualifying assets remain comfortably below the £1 million combined allowance are largely unaffected and continue to benefit from full 100% relief as before.
Anyone with qualifying business or agricultural assets at or above the new threshold should treat this as an urgent estate planning question, given the potential 40% (at an effective 20% rate on the excess) Inheritance Tax exposure that did not previously exist, and should seek current, specific advice rather than relying on general commentary about the reform.