Business Relief After April 2026: What Is Changing

Business relief and agricultural relief have long allowed qualifying business and farm assets to pass largely free of inheritance tax. From 6 April 2026 the rules change in a way that matters a great deal to owners of larger businesses and farms. The 100 per cent rate of relief is now capped, and value above the cap attracts relief at only 50 per cent.

This article explains what is changing and what it means in practice. It is part of our guide to Business Relief and Succession. For planning around your own business or farm, our business succession service at /services/business-succession can put a plan in place for you.

How business relief worked before the change

Business relief reduced the value of qualifying business assets for inheritance tax, at either 100 per cent or 50 per cent depending on the asset. Relief at 100 per cent applied to things like an interest in an unlisted trading business and shares in an unlisted trading company. Relief at 50 per cent applied to certain other assets, such as land or buildings used by a business the person controlled. Agricultural relief worked similarly for qualifying agricultural property.

In effect, a qualifying trading business or farm could often pass down the generations with little or no inheritance tax, provided the conditions were met. That position has now been narrowed.

The change from 6 April 2026

From 6 April 2026, the 100 per cent rate of business relief and agricultural relief is capped at a combined £1,000,000 per person. This is a single shared allowance covering both reliefs together, not £1,000,000 for each. Up to that £1,000,000, qualifying assets continue to attract 100 per cent relief. Above it, the relief drops to 50 per cent.

In practical terms, value above the £1,000,000 combined allowance is effectively taxed at half the normal rate, because only half of it is relieved. With the standard inheritance tax rate at 40 per cent, that means an effective rate of 20 per cent on the unrelieved half above the cap.

Who is affected

The change has the greatest impact on owners of businesses and farms whose qualifying assets are worth more than £1,000,000. Below that figure, the position is broadly unchanged, with full relief still available. Above it, families who had assumed the business or farm would pass with no inheritance tax now face a real liability that needs to be planned for.

• Owners of trading businesses worth more than £1m in qualifying value.
• Farming families whose land and farm assets exceed the combined allowance.
• Owners holding both business and agricultural assets, who share a single £1m allowance across both.
• Families relying on relief to keep a business intact across a generation rather than having to sell part of it to pay tax.

What owners should be thinking about

The change does not remove relief; it limits the most generous rate. There are still planning steps that can soften the effect, and the right approach depends on the structure of the business, the family, and the timing. The general directions of travel are set out below, but each needs specialist input rather than a rule of thumb.

• Reviewing how ownership is split, since the £1m allowance is per person and spouses each have their own.
• Considering lifetime succession, including gifting business interests and the interaction with the seven-year rule.
• Reviewing wills so that reliefs and allowances are used efficiently on each death rather than wasted.
• Considering whether life insurance written in trust could fund a future liability without disrupting the business.
• Modelling the cash impact, since a tax bill on an illiquid business or farm can force a sale of part of it.

The interaction with succession planning

For many family businesses and farms the real issue is not just the tax but the liquidity. A business or a farm is rarely easy to sell in part, and a tax bill that has to be paid within months of a death can be hard to meet without selling assets the family wants to keep. The capping of relief makes this liquidity question sharper, and brings forward the case for planning succession deliberately rather than leaving it to chance.

Common questions

Is the £1m allowance per asset or per person?

Per person, and shared across business relief and agricultural relief combined. It is not £1m for each relief and not £1m per asset. Spouses each have their own allowance, which is one reason ownership structure is worth reviewing.

Does relief disappear entirely above £1m?

No. Above the combined £1m allowance, qualifying assets still attract 50 per cent relief rather than 100 per cent. The effective inheritance tax on the value above the cap is therefore around 20 per cent, not the full 40 per cent.

Should I rush to act before any future change?

Acting under time pressure rarely produces the best plan. The sensible step is to understand how the current rules affect your specific business or farm and to plan accordingly. A specialist can model your position and set out the realistic options.