What Has Changed?
From 6 April 2026, the combined allowance for Business Property Relief and Agricultural Property Relief is capped at £2.5 million per person. Above that figure, the relief drops from 100% to 50%, creating an effective inheritance tax rate of 20% on the excess.
Previously, there was no upper limit — qualifying business assets of any value were fully exempt from IHT.
Who Needs to Pay Attention?
If your business or combined business and agricultural assets are worth more than £2.5 million, you are directly affected. But even if your business is currently valued below the cap, growth could push you over the threshold within a few years.
Owners with multiple business interests, property-rich companies, or unbalanced estates between spouses should review their position now.
What Can You Do?
Several strategies remain effective:
- Equalise assets between spouses to use both £2.5 million allowances
- Consider lifetime gifts of business assets (with a seven-year survival requirement)
- Review your business structure to separate trading from investment assets
- Take out life insurance in trust to cover the potential tax liability
This cap sits alongside other recent tax changes — higher CGT rates, reduced BADR relief, and halved EOT relief — that together have significantly increased the cost of owning and passing on a business.
The Key Takeaway
Get a proper business valuation. If you are above or approaching the £2.5 million threshold, start planning now. These strategies take time to implement, and waiting reduces your options.