From 6 April 2026, business property relief gives 100% relief from inheritance tax on the first £2,500,000 of combined qualifying business and agricultural property per person, and 50% relief on anything above that. Before this reform, most qualifying business property attracted 100% relief with no upper limit, so the change introduces a cap where there was none (gov.uk, updated 23 December 2025, subject to change).
This is often called the business relief 2026 reform. It affects family companies, farms, partnership interests and certain shareholdings passing on death or through some lifetime transfers. This guide sets out the new rules, the figures, and the practical points to consider. All figures are current as at August 2026 and are subject to change.
What the 2026 reform actually changed
Business property relief, usually shortened to BPR or business relief, reduces the value of qualifying business assets when working out inheritance tax. Agricultural property relief (APR) does the same for qualifying farmland and agricultural property. Historically, many business and agricultural assets qualified for 100% relief with no monetary ceiling.
At the Autumn Budget 2024 the government announced that, from 6 April 2026, a cap would apply. The cap was originally announced as £1,000,000, but on 23 December 2025 the government confirmed a higher figure of £2,500,000 for the 100% rate, with 50% relief above it (gov.uk, updated 23 December 2025, subject to change). The reform combines APR and BPR under a single shared allowance rather than giving each its own limit.
How the £2.5 million allowance works
The £2,500,000 allowance is the total value of combined agricultural and business property that can receive the 100% rate. It is a single, shared allowance, so business assets and farmland draw on the same pot rather than two separate ones.
Importantly, any unused allowance on the death of a spouse or civil partner can transfer to the survivor, in a similar way to the nil-rate band. This means a married couple or civil partners could, between them, pass up to £5,000,000 of qualifying property at the 100% rate, on top of the ordinary nil-rate bands (gov.uk, updated 23 December 2025, subject to change). This transferability was confirmed alongside the £2.5m figure and differs from earlier wording published in October 2024.
The £2.5 million allowance is set to be index-linked to the Consumer Prices Index from 6 April 2031 (gov.uk policy paper, as at August 2026, subject to change). Before that date the figure is fixed.
Relief rates before and after 6 April 2026
The table below sets out the qualifying property basics. The two-year (or, in some cases, seven-year) ownership conditions for business relief continue to apply, so an asset held only briefly may not qualify (gov.uk, business relief, as at August 2026, subject to change).
| Position | Before 6 April 2026 | From 6 April 2026 |
|---|---|---|
| 100% relief on qualifying business/agricultural property | No monetary cap | First £2,500,000 combined, per person |
| Relief above the allowance | Not applicable | 50% relief |
| Allowance transferable to spouse/civil partner | Not applicable | Yes (up to £5,000,000 per couple) |
| Standard inheritance tax rate | 40% | 40% |
Source: gov.uk and gov.uk policy paper, updated 23 December 2025, subject to change. The nil-rate band (£325,000) and residence nil-rate band (up to £175,000) remain frozen until 5 April 2031 (gov.uk/inheritance-tax, as at August 2026), subject to change.
AIM shares and other "not listed" holdings
The reform treats some shareholdings differently. From 6 April 2026, shares designated as "not listed" on a recognised stock exchange, which includes shares quoted on AIM, move to a flat 50% rate of relief and do not benefit from the £2.5 million 100% allowance (gov.uk policy paper, as at August 2026, subject to change). Anyone holding AIM shares as part of an inheritance tax strategy may wish to review how this change affects the expected relief.
Worked figures (illustration only)
What the reform means in practice
For many smaller family businesses and farms worth under £2.5 million per owner, full relief may still be available, so the day-to-day position could be unchanged. The reform matters most where combined business and agricultural value is well above the allowance, or where a single individual holds most of that value rather than a couple sharing it.
Because the allowance is transferable between spouses and civil partners, the way assets are owned and left affects how much of the two allowances is used. Our broader guide to inheritance tax and estate planning overview set out how reliefs sit alongside the other allowances.
The reform does not remove business relief. It caps the most generous rate and applies a reduced rate above the cap.
A related change: pensions from 2027
Separately from the business relief reform, from 6 April 2027 most unused pension funds and death benefits are due to be brought within the value of the estate for inheritance tax, a change announced at Autumn Budget 2024 (gov.uk, as at August 2026, subject to change). It is a separate measure from the business relief reform. Our note on planning for the impact of care fees covers related later-life costs.
Frequently asked questions
What is the business relief 2026 reform?
It is a change to inheritance tax that takes effect from 6 April 2026. From that date, business property relief and agricultural property relief give 100% relief on the first £2,500,000 of combined qualifying property per person, and 50% relief above that. Before the reform, most qualifying business property attracted 100% relief with no cap (gov.uk, updated 23 December 2025, subject to change).
Is the £2.5 million allowance transferable between spouses?
Yes. Any unused £2,500,000 allowance on the death of a spouse or civil partner can pass to the survivor, in a similar way to the nil-rate band. That means a couple could pass up to £5,000,000 of qualifying property at the 100% rate between them (gov.uk, updated 23 December 2025, subject to change). This confirms transferability, which differs from earlier wording published in October 2024.
Did the allowance used to be £1 million?
A £1,000,000 figure was announced at Autumn Budget 2024, but it was superseded. On 23 December 2025 the government confirmed a £2,500,000 allowance for the 100% rate instead, so the £2.5 million figure is the current one (gov.uk, updated 23 December 2025, subject to change).
How are AIM shares affected?
From 6 April 2026, shares that are "not listed" on a recognised stock exchange, which includes AIM-quoted shares, move to a flat 50% rate of relief and do not use the £2.5 million 100% allowance (gov.uk policy paper, as at August 2026, subject to change). This is a general point, and how it applies depends on the specific holding.
What is the effective tax rate above the allowance?
Above the £2,500,000 allowance, qualifying property gets 50% relief. Because the standard inheritance tax rate is 40%, taxing half the remaining value works out at an effective rate of up to 20% on the value above the allowance (gov.uk/inheritance-tax, as at August 2026, subject to change). The exact outcome depends on the whole estate.
Does the reform apply across the UK?
Inheritance tax is a UK-wide tax, so the relief rules apply in England, Wales, Scotland and Northern Ireland. This guide is written for England and Wales, and the way assets pass under a will or on intestacy differs in Scotland, which has its own succession law. Cross-border estates may need advice in each jurisdiction (gov.uk/inheritance-tax, as at August 2026, subject to change).