BPR: Why the £2.5 million allowance still demands action before April

From April 2026, Business Property Relief (BPR) will change. On 23 December 2025, the government announced that the 100% inheritance tax (IHT) relief allowance for qualifying business assets will be £2.5 million per person from April (up from the £1 million previously announced).

In simple terms, individuals with qualifying business interests will be able to pass on up to £2.5 million (or £5 million with their spouse or civil partner) of such qualifying interests free of IHT. Any qualifying value above that cap will receive only 50% relief - resulting in an effective 20% IHT charge on the excess.

While the increase is a welcome improvement from the initial 2024 Budget proposals, the rules from 6 April 2026 remain more restrictive than the current regime. Not everyone is safe.

Are you safe?

Many owners of mid‑sized trading businesses can breathe a sigh of relief. Provided they have a good, well implemented succession plan, the uplift may keep them fully sheltered from IHT. However, if your personally held qualifying business assets are worth more than £2.5 million, there is still a meaningful liability to plan for to ensure the stability of your business.

Based on statistics published before Christmas, only around one third of estates expected to be claiming BPR alone are now “safe” from IHT on their BPR assets with the benefit of a £2.5 million allowance, as opposed to £1 million. 

Perhaps even more telling is where the government expects to benefit from the changes. HMRC’s published data indicates that in 2022/23, whilst estates with BPR claims valued at over £2.5 million represented only 6% of claims, those claims accounted for roughly 60% of the total value of BPR claimed—with total claims of just shy of £2 billion.

For those exceeding the new allowance, the increase may not feel meaningful. Take an example: if an individual holds shares valued at £10 million, then—ignoring other reliefs or exemptions and assuming a full personal allowance—the original £1 million cap would have produced an IHT charge of about £1.8 million. Under the £2.5 million cap, that liability falls only to £1.5 million. In other words, the larger the holding, the smaller the benefit of the increased allowance. 

Without proper planning, those with sizeable shareholdings continue to face a substantial liquidity issue on death, with the attendant risks of forced sales and loss of control.

What should you be doing now?

Whether or not you are “safe” from IHT on your BPR assets, you should:

• Review your Will to ensure it banks BPR where appropriate.
• Review your wider estate plan—particularly your Will, lasting powers of attorney, and any prenuptial agreements—to ensure they remain appropriate and align with business succession plans.
• Quantify your estimated IHT exposure under the changes and explore mitigation strategies (for example, gifting, restructuring, or revising investment strategies) and funding options. Mitigation strategies should be implemented pre-April.
• Test the applicability of BPR carefully before implementing any planning strategies.
• Review your corporate governance documents to ensure alignment with your business and personal succession plans.
• Take advice and ensure your advisers are joined up in designing and implementing your strategy.

The increased allowance is a positive change, but business owners with shares worth more than £2.5 million are not out of the woods. The effective 20% charge on value above the cap can still be significant and requires sensible planning now.