April 2026 will bring the biggest shake-up to Business Property Relief (BPR) in a generation and businesses have just one year left to act.
From 6 April 2026 the amount of value that can enjoy a full 100% exemption will be capped at £1 million per individual. With IHT thresholds frozen and asset values climbing, owners now have a short period in which to update their plans.
In this blog Steve Tobin, Tax Consultant at Haines Watts Wirral, explains what the changes mean for your business and how to think ahead.
Headline reforms taking effect on 6 April 2026
Here are the key changes to be aware of:
-
£1 million 100 % allowance: Above that, relief drops to 50 %, creating an effective tax rate of 20%.
-
No transfer of unused allowance: Passing all shares to a surviving spouse uses up the ‘first-to-die’s’ cover; the couple has access to only one allowance, not two.
-
AIM and other unlisted shares: From day one, these shares attract the 50 % rate provided they have been held for at least two years, even when the £1 million ceiling has not been breached.
-
Trust limitation: Trusts set up before 30 October 2024 keep a separate £1 million allowance; trusts created later must share a single pot.
-
Combined pot with Agricultural Property Relief (APR): The same £1 million covers both reliefs, including changes to agricultural property relief. Mixed rural estates must therefore add their farm value and company shares together.
Why the changes matter – and why now is the time to act
Owners often assume time is on their side, yet the numbers here say otherwise.
- Record receipts: IHT raised an unprecedented £8.2 billion in 2024-25, largely because main allowances have been frozen since 2009. The new BPR cap is forecast to raise a further £0.5 billion a year.
- Asset-rich, cash-poor businesses: Firms with valuable freeholds, professional practices with high goodwill and tech scale-ups whose AIM share prices have grown could now face a 20 % charge unless cash is ring-fenced.
- Limited runway: Transactions that rely on the present rules, such as share gifts, demergers, trust restructuring, take months to complete and may have a two-year qualifying clock.
- Closer HMRC scrutiny: With more estates in play, inspectors will focus on whether trading tests are met and whether surplus assets should be excluded.
Preparing during the 2025-26 window
With a year still on the clock, owners can make meaningful adjustments. The goal is to use allowances fully, protect the trading status and build cash-flow solutions.
- A measured ownership review often delivers the greatest benefit. By spreading shares across family members, you could double or even triple your £1m protection — but only if they’ve held them for two years.
- Balance-sheet housekeeping can help you move extra cash and investment property into a separate structure.
- Historic discretionary trusts settled before 30 October 2024 keep their own allowance, so retaining them may be sensible. Newer trusts, which would share the cap, could simply add cost.
- Lifetime gifts remain powerful, but any transfers after 30th October 2024 are restricted to £1 million if the person subsequently dies within 7 years.
Cash-flow planning is crucial. Estimate the 20% tax on anything above the £1m cap, then plan how to cover it — with life insurance in trust, paying off director’s loans to heirs, borrowing against property, or buying back shares over time. Make sure any insurance payouts are protected by proper shareholder agreements.
Key milestones between now and April 2026
While the precise details may change somewhat between now and next year, there is an urgent need to start planning now.
- Spring–Summer 2025: Commission an up-to-date valuation; map trading vs investment assets.
- By 30 October 2025: Final window to create any new trusts that need their own allowance.
Note, that where settlors have created more than one trust before 30th October 2024, each trust will benefit from a £1m allowance for 100% relief from 6th April 2026. Where multiple trusts are created by the same settlor after 30th October 2024, the £1m allowance will be divided between them.
Getting ahead with Haines Watts
Working with an experienced advisor can help you make full use of available credits and savings, while also avoiding compliance breaches and penalties. At Haines Watts, we specialise in building bespoke plans that fit the needs of your business and your future goals.
Our services include:
- BPR health-check: a clear breakdown of qualifying and non-qualifying value today and under the new rules.
- Ownership restructuring: Exploring tax-efficient share transfers, alphabet share creation, spousal equalisation and group demergers.
- Trust optimisation: Modelling ten-year and exit charges, deciding whether to merge, retain or wind up.
- Cash-flow planning: Comparing insurance, lending capacity and staged share buy-backs to meet any residual IHT without distress.
- Legislative monitoring: Real-time updates on consultation outcomes, Finance Bill progress and HMRC practice so plans stay aligned.
The clear message to all business owners is that the sooner you act, the more control you can exert over your future. By taking stock in 2025, valuing the business, balancing ownership, cleaning up non-trading assets and securing liquidity, families can make sure the enterprise they have built remains both operationally strong and tax-efficient when the new rules bite in 2026.
For bespoke guidance, contact the Haines Watts team today.
