Changes to business property relief

Time is running out. With just two months until major changes to Business Property Relief (BPR) and Agricultural Property Relief (APR) come into effect on 6 April 2026, business owners and farming families face a critical juncture. These reforms will fundamentally alter succession planning for family businesses across the UK, far beyond the agricultural sector.

 

While media coverage has largely focused on farming, the changes apply equally to trading businesses, too, which have flown under the radar. The reforms extend to family businesses across every sector. From manufacturers and wholesalers to retailers and rural enterprises.

 

Under the previous rules, qualifying business assets up to any value could pass on death free of inheritance tax (IHT). From 6 April 2026, any value above £2.5 million will attract an effective 20% IHT charge on death and 10% on transfer to a trust, even for assets that previously qualified for 100% relief.

 

This represents a seismic shift in how inheritance tax is applied to family-owned businesses, and for many, it will mean scrambling to raise cash to cover a tax bill that could run into the millions.

 

 

Who will be hit hardest?

The hardest-hit groups include: 

• Single business owners with high-value estates who do not have partners or co-owners to share the tax burden
• Cohabiting families, where succession planning may be less structured than in traditional trusts
• Farms and businesses valued over £5 million, even if they are profitable and sustainable 

The bottom line is that most family businesses and farms are vulnerable. Many businesses valued over £5 million will struggle to raise sufficient funds to meet IHT liabilities over a ten-year period, potentially jeopardising growth, jobs, and investment. This is likely to be especially acute for farms, where is commonly a mismatch between land values (high) and the income that land can generate (low).

 

 

Early signs of impact on investment and jobs

Evidence suggests that uncertainty over these reforms is already influencing business decisions. According to a report by Family Business UK and the CBI Economics, many family-owned businesses are reducing investment, delaying expansion, and pausing recruitment in anticipation of higher tax burdens (FBUK & CBI Economics, 2025).

 

Key findings from the report include: 

• Businesses expect to cut investment by around 17%, with associated falls in turnover and employment.
• Family-owned businesses and farms across sectors will reduce economic activity, affecting supply chains, employment, and Gross Value Added (GVA) across the economy - the projected GVA loss is £9.4 billion between April 2026 and April 2030, and 125,900 FTE jobs.
• Despite higher projected tax receipts from the reforms, the overall economic contraction could result in a net fiscal loss to the Exchequer. 

This data indicates that the reforms could shrink the tax base rather than expand it, underscoring the importance of proactive planning.

 

 

Could the Government have taken a smarter approach?

Critics argue that a clawback-style relief system would have been fairer and more sensible, and I would certainly agree. For example, a system in which inheritance tax is only triggered if land or a business is sold within a set period after the owner’s death (five years, say) would have maintained fairness while discouraging investors from using land or businesses as tax shelters.

 

As it stands, any farm or business now faces a potentially enormous tax liability regardless of whether assets are sold. This creates a liquidity challenge for many businesses: finding millions of pounds over ten years is manageable for some, but impossible for others. This will be especially so for families whose wealth is very largely tied up in their businesses, because it is likely that there will be insufficient other assets in their estate to cover any IHT. As a result, the true cost is likely to be greater as cash would need to be paid out as dividends before it could be used to pay an IHT bill.

 

 

Bringing succession planning to the fore

With just two months to go before uncapped transfers to trusts cease to be available, proactive action is vital. Business owners should review estate planning, ownership structures, and succession strategies immediately.

 

Preparing for the transfer of ownership and leadership ensures long-term continuity, safeguards family wealth, and provides clarity for all involved. Without a clear plan, businesses risk disruption at a critical time, particularly when multiple family members or co-owners are involved.

 

Succession planning involves reviewing current ownership and management, identifying key individuals, and establishing clear objectives, whether that’s maintaining family control, preparing for a sale, or ensuring operational stability.

 

Succession planning will also depend on your business structure: 

• Sole traders typically need to sell assets or wind down operations, making continuity more challenging.
• Partnerships require a careful review of partnership agreements to ensure that remaining partners can continue operations smoothly.
• Limited companies can transfer shares to family members, hold assets in trusts, or structure share classes to retain control while enabling succession. 

Several strategies can be considered:

 

1. Review transfers to trusts. Transfers made after 6 April 2026 will be subject to immediate IHT at 10% on qualifying assets exceeding £2.5 million. Acting before the cut-off can preserve relief.

 

2. Consider gifting to children or key beneficiaries. Structured gifting spreads tax exposure and enables smoother ownership transitions.

 

3. Plan large transfers strategically. Staggered transfers or partial buyouts allow ownership to pass without triggering crippling tax liabilities.

 

4. Reassess governance arrangements. Clear agreements on roles, voting rights, and decision-making help prevent disputes and support continuity.

 

 

Practical options for action

Family business owners might consider these approaches: 

• Transferring part of the business into a discretionary trust to secure 100% relief on the first £2.5 million and mitigate the 50% relief on any excess.
• Gifting shares to the next generation in stages, spreading tax liability and allowing a smooth transition.
• Reviewing ownership divisions among family members, ensuring sufficient liquidity to meet tax obligations without selling core assets.
• Ensuring all relevant legal documentation is in place, including wills, trusts, partnership agreements, shareholders’ agreements, and powers of attorney.

Engaging professional advisors early ensures that any action is structured to preserve value, minimise tax exposure, and support a smooth leadership transition.

 

 

Protecting wealth, protecting future generations

With the clock ticking, business owners and farming families must act decisively. The April 2026 changes to BPR and APR will have profound consequences across sectors. It is not the time to bury your head in the sand, but it is not too late to implement well-planned succession strategies backed by the right legal structures and documentation. Doing so can protect wealth, maintain stability, safeguard jobs, and ensure continuity for the next generation.

 

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Tom Gauterin is Legal Director and Private Client Specialist at Goughs Solicitors

 

Main image courtesy of iStockPhoto.com and ArtistGNDphotography