Business Property Relief Budget 2024 UK: The £1 Million Cap on Company Shares and Partnerships

Updated 31 May 2026 · 8 min read · Inheritance Tax & Business Succession

Business owners who relied on 100% BPR to pass their company or partnership interests free of IHT must reassess their succession plans. From 6 April 2026, a £1 million combined cap applies to both BPR and APR — with a 20% effective IHT rate on qualifying business assets above the threshold.

What BPR Covers

Business property relief (BPR) under IHTA 1984 ss.103–114 provides relief at:

100% BPR: sole trader businesses, partnership interests, unquoted company shares (including AIM), and controlling shareholdings in quoted companies
50% BPR: land/buildings/machinery owned personally but used in the business of a controlled company or partnership

The business must be a trading business — investment businesses (property investment companies, investment portfolios) do not qualify. Minimum holding period: 2 years before the chargeable event.

The October 2024 Budget Change

From 6 April 2026, the combined APR and BPR cap of £1 million at 100% relief means:

£0–£1m of combined BPR + APR qualifying assets → 100% relief (0% IHT)
Above £1m of combined qualifying assets → 50% relief (20% effective IHT)
Cap is per person — a business-owning couple can potentially shelter £2m across two estates

For a sole trader with a business worth £2 million: the first £1 million is exempt; the second £1 million attracts 50% BPR, leaving £500,000 chargeable at 40% IHT = £200,000 tax. Before April 2026, the business was fully exempt.

AIM Shares: Still Qualifying, But Now Capped

AIM-listed shares in qualifying trading companies continue to attract 100% BPR. The October 2024 Budget did not remove AIM from the BPR qualifying list — it applied the same £1 million cap. Investors holding AIM portfolios for IHT planning purposes should review whether their portfolio value exceeds the cap and reassess the strategy accordingly.

Interaction With the Nil-Rate Band

The BPR/APR cap operates alongside — not instead of — the nil-rate band (£325,000) and RNRB (up to £175,000). For a business owner dying in 2026/27:

Nil-rate band (£325,000) → 0% IHT
RNRB if applicable (up to £175,000) → 0% IHT on qualifying residential interest
BPR/APR cap (£1 million) → 0% IHT on qualifying business/agricultural assets
BPR/APR excess → 20% effective IHT
Non-qualifying estate assets above nil-rate band → 40% IHT

Key Planning Actions for Business Owners

Review your will — ensure it optimises the allocation of business assets across both spouses’ BPR caps and nil-rate bands.
Consider lifetime transfers — gifts of qualifying business property during the owner’s lifetime benefit from BPR at the date of the gift and become fully exempt after 7 years.
Employee ownership trust (EOT) — a lifetime sale to an EOT can be structured entirely free of IHT and CGT under Finance Act 2014 provisions.
Life insurance in trust — fund the anticipated 20% IHT charge on the excess with a whole-of-life policy written in trust, payable outside the estate.
Instalment payments — elect to pay IHT on business property by instalments over 10 years (IHTA 1984 s.228) to avoid forced sale.

FAQs

What is business property relief and what did the October 2024 Budget change?

Business property relief (BPR) is an IHT relief under IHTA 1984 ss.103–114 that reduces the chargeable value of qualifying business assets on death or lifetime transfer. Before the October 2024 Budget: qualifying assets attracted 100% BPR with no cap — meaning the entire value of, for example, an unquoted trading company was exempt from IHT. The October 2024 Autumn Budget (30 October 2024) announced that from 6 April 2026, BPR and agricultural property relief (APR) will be subject to a combined cap of £1 million at 100% relief. Business and agricultural assets above the combined £1 million cap will attract only 50% relief — producing an effective IHT rate of 20% (50% × 40% standard rate). The cap is per person per estate and is not transferable between spouses. This is the most significant reform to BPR since it was substantially expanded in 1992.

Which business assets qualify for BPR?

Under IHTA 1984 s.105, BPR at 100% applies to: (1) A business or interest in a business (sole trader or partnership interest) — the entire capital value of the business. (2) Unquoted shares in a qualifying trading company — shares in a company not listed on a recognised stock exchange (including AIM-listed shares, which are treated as unquoted for BPR purposes). (3) Shares giving control of a quoted company — where the deceased owned shares carrying more than 50% of the voting rights in a quoted company. BPR at 50% applies to: (1) Land, buildings, or machinery owned personally but used in the business of a company controlled by the deceased or a partnership in which the deceased is a partner. The business must be a trading business — investment businesses (including property investment companies) do not qualify. Mixed businesses may qualify in part. The minimum ownership period for BPR is 2 years before death (or the date of the chargeable transfer).

How does the £1 million combined cap work for a business owner with no agricultural property?

For a business owner with no agricultural property, the £1 million cap applies entirely to BPR qualifying assets. Example: a sole trader with a business worth £3 million dies in 2026/27. The nil-rate band (£325,000) and any RNRB are applied first. Then the BPR cap: the first £1 million of the business value attracts 100% BPR (no IHT). The next £2 million (£3m - £1m cap) attracts 50% BPR — so £1 million is chargeable to IHT at 40% = £400,000. Before April 2026, the entire £3 million business would have been exempt. For a business owner who also has agricultural property: the £1 million cap applies to the combined value of BPR and APR qualifying assets. A business owner whose estate includes both a farm and a trading company must allocate the £1 million cap across both types of qualifying property.

What planning options are available for business owners after Budget 2024?

Planning options for business owners following the October 2024 Budget changes: (1) Lifetime transfers — gifting shares or business interests during the owner's lifetime. If the gift qualifies for BPR at the date of the gift, BPR applies at that date. After 7 years, the gift becomes a fully exempt PET. The donor must genuinely relinquish control and benefit. (2) Life insurance — a whole-of-life policy written in trust to fund the expected IHT liability. The benefit is paid directly to the trustees, outside the estate, to fund the charge. (3) Employee ownership trusts (EOTs) — transferring a business into an EOT (a trust for the benefit of employees) can achieve a tax-free exit during the owner's lifetime under Finance Act 2014 provisions, entirely outside the IHT regime. (4) Business reorganisation — splitting the business so that the most valuable assets pass to the next generation during the owner's lifetime, or restructuring the shareholding so that the share of the estate qualifying for BPR does not exceed £1 million per person. (5) Will restructuring — ensuring the business interest passes to a direct descendant on the first death to access the BPR cap, with the surviving spouse's estate retaining non-qualifying assets, rather than the reverse.

Do AIM shares still qualify for BPR after the October 2024 Budget?

Yes — AIM-listed shares in qualifying trading companies continue to qualify for BPR at 100% subject to the 2-year minimum holding period. AIM shares are treated as unquoted for BPR purposes under IHTA 1984 s.105(1)(b). The October 2024 Budget did not remove AIM from the BPR qualifying list — it applied the same £1 million combined cap. AIM portfolios worth more than £1 million that were previously fully exempt will now have the excess subject to 50% BPR (20% effective IHT rate). For investors who held AIM portfolios specifically for IHT planning purposes (common in the wake of the AIM market's BPR-qualifying treatment), the Budget 2024 changes require a reassessment. The Budget also indicated that qualifying investment company structures (e.g., VCTs and EIS) were not affected by the cap — though specific advice is essential as the rules are complex. It is worth noting that HMRC regularly challenges BPR on AIM shares where the company is considered investment-heavy rather than purely trading.

What is the instalment payment option for IHT on business property?

Like agricultural property, IHT on business property that qualifies for BPR (even at the 50% reduced rate above the cap) can be paid by annual instalments over 10 years under IHTA 1984 s.228. Key features for business property: (1) The instalment option is available for shares in an unquoted company, a sole trader's business, and a partnership interest. (2) Unlike agricultural property, the business property instalment option is not automatically interest-free — interest is charged on outstanding instalments at the HMRC late payment rate, unless the business property also happens to be a business that generates income from which instalments can be paid. (3) If the business property is sold before all instalments are paid, the remaining IHT falls due immediately. (4) The instalment option must be elected at the time of the IHT400 filing — it does not apply automatically. For significant business property above the BPR cap, the instalment option provides cash flow relief for family businesses that would otherwise need to be sold or refinanced to pay the IHT charge.

Update Your Business Succession Plan

The April 2026 BPR cap changes the IHT position of business owners fundamentally. Your will and succession plan need urgent review before April 2026. WillSafe’s DIY will kit puts a valid personal will in place today; for business succession with significant IHT exposure, specialist corporate and tax legal advice is essential.

Start Your Will ›