Planning Around the April 2026 BPR/APR Cap: Strategies for the £2.5m Limit
From 6 April 2026, 100% Business Property Relief and 100% Agricultural Property Relief are combined and capped at £2.5 million per person. Assets above the cap attract 50% relief — an effective IHT rate of 20%. Using both spouses’ separate caps, prioritising asset allocation, and lifetime transfers are the main planning levers.
Key Planning Strategies at a Glance
| Strategy | How it helps |
|---|---|
| Use both spouses' caps | Each spouse has a separate £2.5m allowance. A couple can shelter up to £5m at 100% BPR/APR by holding qualifying assets in both names (£2.5m each). Joint or co-owned qualifying business property may need to be restructured so each spouse holds a distinct portion. |
| Prioritise higher-value assets within the cap | Where total qualifying assets exceed £2.5m, place higher-value assets within the £2.5m cap (where they receive 100% relief) and treat lower-value assets as the 'excess' (receiving 50% relief). The ordering can affect the total IHT bill on a mixed estate. |
| Consider holdover relief on lifetime gifts | A gift of a qualifying business asset triggers CGT but holdover relief under TCGA 1992 s165 defers the gain to the donee. The gift removes the asset from the estate entirely — no BPR/APR needed. Holdover relief is only available for gifts of qualifying business assets, not AIM shares held as investments. |
| Time transfers between spouses | If one spouse holds more than £2.5m of qualifying business/agricultural assets, transferring excess assets to the other spouse uses the second spouse's cap. Spousal transfers are IHT and CGT-free at market value. Assets must be transferred before death to make use of the second cap. |
| Separate APR and BPR assets | APR and BPR share the same £2.5m cap. A farm with a farmhouse (APR), agricultural land (APR), and farm machinery / trading stock (BPR) — all count against the same £2.5m per person. Planning the ownership structure between family members can multiply the available cap. |
| EIS for additional IHT-efficient investment | EIS shares (unquoted trading companies) still qualify for 100% BPR after 2 years, subject to the same £2.5m cap. For investors with a business already using most of the cap, EIS may overlap and not provide additional benefit. However, a family where one spouse holds the business and the other holds EIS shares can use two separate caps. |
How the £2.5m Cap Works in Practice
The cap is applied per person, per estate. At death, the personal representatives identify all qualifying BPR and APR assets in the estate. The first £2.5m of those assets (by value) attracts 100% relief — reducing their IHT value to nil. Any qualifying assets above £2.5m attract 50% relief — reducing their IHT value by half, so IHT applies to the remaining 50% at 40% (an effective rate of 20%).
The cap applies to the combined value of 100%-qualifying BPR and APR assets — APR and BPR share the same £2.5m pool. Where an estate contains both business and agricultural property, the highest-value assets should be allocated to the first £2.5m of the cap to minimise the IHT charge on the excess.
Using Both Spouses’ £2.5m Caps
The most significant planning opportunity created by the cap is the availability of a separate £2.5m allowance for each individual. A couple whose combined qualifying business or agricultural assets are worth more than £2.5m should consider restructuring ownership so that each spouse holds qualifying assets separately up to the cap.
Transferring qualifying assets between spouses during their lifetime uses the IHT spousal exemption (no IHT on transfer to UK-domiciled spouse) and the CGT no-gain no-loss rule (no CGT on transfer to a spouse in the same household). The receiving spouse takes the assets at the transferor's original base cost for CGT, but the BPR/APR two-year minimum holding period (if applicable) should restart from the date of the spousal transfer.
For farms and family companies where the senior generation holds all the assets, transferring shares or land to a spouse before the cap bites can double the available 100% relief allowance. Tax advice on the CGT base cost implications and any stamp duty or stamp duty land tax on the transfer should be taken.
AIM Shares and the Cap: No Overlap
From April 2026, AIM-quoted shares that qualify as relevant unquoted business property for BPR purposes attract only 50% BPR — there is no 100% rate for AIM shares from April 2026. Because the cap applies only to assets qualifying for 100% relief, AIM shares do not use up any of the £2.5m cap.
This means that an investor with a qualifying unquoted business (using the full £2.5m cap) and an AIM portfolio (attracting 50% BPR outside the cap) effectively has two separate pools of IHT-relieved assets. The business uses the £2.5m 100%-relief cap, and the AIM portfolio benefits from 50% BPR separately.
For estate planning purposes, investors should note that: (1) EIS unquoted trading company shares DO qualify for 100% BPR and DO count toward the cap; (2) AIM shares qualify for 50% BPR and are outside the cap; (3) VCT shares do not qualify for BPR at all.
Frequently Asked Questions
What exactly is the April 2026 £2.5m BPR and APR cap?
From 6 April 2026, the amount of qualifying business property and agricultural property that can attract 100% Business Property Relief (BPR) or 100% Agricultural Property Relief (APR) is capped at £2.5 million per person (per estate). The £2.5m cap applies to the combined total of 100%-qualifying BPR and APR assets. Assets above the £2.5m cap still attract relief — but at 50% (rather than 100%), which means an effective IHT rate of 20% on the excess (50% of 40%). Before the cap was introduced (by the October 2024 Budget, effective from April 2026), there was no limit on the amount of business or agricultural property that could attract 100% relief. A family farming business worth £10 million attracted 100% APR/BPR on the full value, meaning no IHT. From April 2026, £2.5m of that value gets 100% relief, and the remaining £7.5 million gets 50% relief — a significant IHT charge. The 50% rate for assets above the cap is also the rate that applies to AIM-quoted shares from October 2024 onwards.
Does each spouse get their own separate £2.5m BPR/APR allowance?
Yes — the £2.5m cap applies per person (per estate). Each individual who owns qualifying BPR or APR assets gets their own £2.5m cap. A husband and wife who between them own £5 million of qualifying business or agricultural assets can each claim 100% BPR/APR on their £2.5m share, provided the assets are structured so that each spouse holds £2.5m of qualifying property. An estate where one spouse holds all £5 million of the qualifying assets can only claim 100% relief on £2.5m — the remaining £2.5m gets 50% relief. The straightforward planning point is that inter-spousal transfers (which are IHT and CGT-exempt) can be used before death to rebalance qualifying assets between spouses so that each estate gets maximum benefit from the £2.5m cap. Transferred RNRB (the Transferable RNRB from first death) is a separate allowance and unaffected by the BPR/APR cap planning.
Does the £2.5m cap apply to AIM shares?
From April 2026, AIM-quoted shares only attract 50% BPR (the 100% rate was reduced in the October 2024 Budget to take effect from 6 April 2026). Because AIM shares now only qualify for 50% BPR in any event, they do not use up any part of the £2.5m cap for 100% relief — the cap only applies to assets qualifying for 100% relief. The practical effect is: (1) AIM shares always attract 50% BPR from April 2026 — there is no 100% rate to cap. (2) AIM shares do not count against the £2.5m cap for 100% qualifying assets. (3) An investor holding a family business (qualifying for 100% BPR up to £2.5m) and an AIM portfolio (qualifying for 50% BPR regardless) effectively has two tiers of relief — the full £2.5m cap is available for the business assets without any reduction for the AIM portfolio.
How does the cap interact with a mixed farming and trading business estate?
A farm typically includes several types of asset, each potentially attracting relief under different provisions: (1) Agricultural land occupied for the purposes of agriculture — APR under IHTA 1984 ss115–124B at 100% (up to the cap). (2) The farmhouse — APR at 100% if of a character appropriate to the agricultural property. (3) Farm buildings, equipment, livestock, and trading stock — typically BPR under s105 IHTA 1984 as part of a business. (4) Non-agricultural land or development land — no APR, BPR may be available if part of the business. For a mixed farm, the APR and BPR assets all count toward the same £2.5m per-person cap for 100% relief. If the combined value of 100%-qualifying APR and BPR assets exceeds £2.5m, a planning exercise is needed to determine which assets should take priority within the cap. Higher-value assets should generally be prioritised — putting more valuable land within the cap and treating less-valuable assets as the 50%-relief excess reduces the total IHT bill.
Can a trust structure help use the BPR/APR cap more efficiently?
Using trusts to split qualifying assets between spouses or multiple family members can multiply the number of £2.5m caps available, but the rules are complex. A discretionary trust can hold qualifying business or agricultural assets. The periodic (10-year) charge and exit charge are calculated on the relevant property, but BPR/APR is available to reduce the charge. However, the £2.5m cap applies per chargeable event — so the trust's cap is assessed separately from the settlor's personal estate. A lifetime gift of qualifying business assets into a discretionary trust: (1) is a chargeable lifetime transfer, potentially subject to IHT at 20% above the nil-rate band at the time of settlement; (2) triggers CGT at the time of transfer unless holdover relief under TCGA 1992 s260 applies; (3) the assets are removed from the settlor's estate, so the settlor's personal £2.5m cap is preserved for other qualifying assets; (4) the trust's qualifying assets have their own £2.5m cap for the periodic charge calculation. Trusts are not a panacea — the entry charge, loss of personal CGT exemptions, and administrative costs must be weighed against the potential IHT saving.
Should I consider holdover relief on lifetime gifts to children to avoid the cap?
CGT holdover relief under TCGA 1992 s165 allows the gain on a gift of qualifying business assets to be deferred — the gain is transferred (held over) to the recipient, reducing their base cost. The donor pays no CGT on the gift. For IHT, a lifetime gift of qualifying BPR or APR assets removes those assets from the donor's estate and sidesteps the BPR/APR cap entirely — the assets are not in the estate at death, so no BPR is needed. If the donor survives 7 years, the gift is a PET that falls outside the estate entirely. If the donor does not survive 7 years, the gift value is brought back into the estate for IHT calculation (but BPR/APR may still be available on the gifted assets if they remain qualifying at the donor's death). Key points: (1) Holdover relief under s165 only applies to gifts of qualifying business assets as defined in TCGA — this broadly mirrors the BPR trading requirement but is not identical. (2) The 7-year PET clock must run to get the full IHT benefit. (3) Where business succession is planned (handing a business to the next generation), lifetime gifts with holdover relief may be the most efficient combined CGT/IHT strategy — and the BPR cap becomes irrelevant because the asset has left the estate.
Business Assets in Your Will — Plan Now
Your will should reflect the new BPR/APR cap and direct business or agricultural assets to the most tax-efficient beneficiaries. WillSafe will kits from £19.97.