Business Property Relief IHT 2026: The £1 Million Cap, AIM Shares, Farms, and What Changed (Finance Act 2026)
From 6 April 2026, BPR and APR relief above £1m combined drops from 100% to 50%. A £3m farm now faces up to £470k IHT instead of £0. AIM portfolios above £1m: 20% effective rate. The biggest change to business and farm IHT in 40 years.
Finance Act 2026 — New Cap from 6 April 2026
The £1m combined BPR/APR cap applies to deaths on or after 6 April 2026. There are no transitional protections for pre-existing assets. Existing BPR/APR estate plans should be reviewed urgently.
| Asset Type | BPR/APR Rate | Conditions | Before April 2026 | After April 2026 (Finance Act 2026) |
|---|---|---|---|---|
| Shares in qualifying unquoted trading company (including AIM-listed shares) | 100% BPR (ss103-114 IHTA) — subject to new £1m combined cap from 6 April 2026 | Must be in a qualifying trading company (not mainly investment activities — s105(3) IHTA); held for 2yr+ (ss106-108 IHTA). Qualifying trading: genuine trade — manufacturing, service businesses, property development (not property investment). AIM shares specifically included as 'unquoted' for BPR (s105(1)(bb) IHTA — not listed on a recognised stock exchange). | 100% BPR; unlimited. £5m AIM portfolio = £0 IHT. | First £1m of qualifying BPR + APR assets = 100% BPR. Above £1m = 50% BPR. Effective IHT rate on excess: 50% qualifying value × 40% = 20%. £2m AIM portfolio: £1m @ 0% + £1m @ 20% = £200k IHT. |
| Interest in qualifying unquoted trading partnership (including LLPs) | 100% BPR — subject to new £1m combined cap from 6 April 2026 | Partnership must be carrying on a qualifying trade; partner must have been a partner for 2yr+. HMRC IHTM25131: the interest must be in a genuine trading business. Investment LLPs (e.g., private equity fund LLPs investing capital) do NOT qualify. Trading LLPs (professional services, farming partnerships, etc.) do qualify. | 100% BPR; unlimited. £3m farming partnership interest = £0 IHT. | £3m farming partnership: £1m @ 0%; £2m @ 20% = £400k IHT. Combined with any APR on farmland: the £1m cap is shared across ALL qualifying BPR and APR assets in the estate. |
| Assets (land/buildings/machinery) owned personally and used in deceased's qualifying trading company | 50% BPR (s105(1)(d) IHTA) — subject to new £1m combined cap | The owner must use the asset in their own qualifying trading company or partnership; held for 2yr+. Example: factory building owned personally by the shareholder, used exclusively by their trading company. The 50% rate applied even before the cap (now 50% capped at £1m combined, and may be nil-effective above the cap: 50% of qualifying × 40% = 20% rate on the asset). | 50% BPR; unlimited. Factory worth £1m: £1m × 50% = £500k relief; IHT = £500k × 40% = £200k. | Same rate (50%) but within the £1m combined cap. If the £1m cap is fully used by other assets (e.g., qualifying shares), this asset gets 0% rather than 50% relief on the cap calculation. The cap mechanics are complex — specialist advice required. |
| Agricultural property — qualifying farmland (APR — ss115-124 IHTA 1984) | 100% APR on agricultural value — subject to new £1m combined BPR/APR cap from 6 April 2026 | Qualifying agricultural property (s115 IHTA): agricultural land, farm cottages/buildings used for agricultural purposes, farmhouses 'of a character appropriate' to the holding (HMRC IHTM24190). Agricultural value (not development value). Let land (ATA 1995 tenancies): 100% APR. Owner-occupied: 100% APR. Scotland: farm tenancies. 2yr holding for owner-occupation; 7yr holding for let land (s117 IHTA). | 100% APR; unlimited. £4m farm = £0 IHT. | £4m farm: £1m @ 0% (APR); £3m @ 50% APR = £1.5m chargeable; £1.5m − NRB £325k = £1.175m × 40% = £470k IHT. Previously = £0. The cap means large farms now face significant IHT for the first time. |
| Development value of farmland above agricultural value | NO BPR or APR on development value — APR only covers agricultural value | The uplift in land value due to planning permission or development potential does NOT qualify for APR. Agricultural value = the value of the land FOR agricultural purposes (without development uplift). The development value portion of the land is subject to full IHT. Example: farmland with agricultural value £500k but planning permission value £2m: APR covers only £500k; £1.5m development value subject to IHT at 40% (minus NRB). | Same position — development value was always subject to IHT. | Same — development value portion: full IHT. Agricultural value: now subject to £1m combined cap. Farms near development areas face double exposure: large estates and development value both contributing to IHT. |
| AIM shares — qualifying portfolio (unquoted trading company shares) | 100% BPR as unquoted shares (s105(1)(bb) IHTA) — subject to £1m combined cap from April 2026 | AIM shares qualify as 'unquoted' for BPR — AIM is not a 'recognised stock exchange' (Finance Act 2014 change confirmed BPR availability). Shares must be in a qualifying TRADING company. Investment trusts, property companies, fund management companies holding investments: do NOT qualify. Minimum 2yr holding. The AIM share must be in a company carrying on a genuine trade at the date of death. | 100% BPR; unlimited. AIM IHT portfolio of £1m-£5m: £0 IHT. Specialist AIM-IHT portfolios widely marketed by wealth managers for this purpose. | £1m combined cap. AIM portfolio of £2m: £1m @ 0%; £1m @ 20% = £200k IHT. Specialist AIM-IHT services are adjusting strategies in response. Still useful for estates between £0-£1m of qualifying assets. Consider combining with other BPR assets — the cap is SHARED. |
| EIS/SEIS investments (qualifying trading companies) | 100% BPR as unquoted shares — subject to £1m combined cap from April 2026. ALSO: income tax relief (30% EIS / 50% SEIS), CGT deferral (EIS), CGT exemption on sale (EIS/SEIS held 3yr+). Multiple reliefs available simultaneously. | EIS/SEIS shares qualify for BPR as shares in unquoted trading companies. Must be held for 2yr+ for BPR. The company must be a qualifying EIS/SEIS company carrying on a qualifying trade. For BPR: the same trading test applies as for any unquoted company (s105(3) IHTA). Subject to the £1m combined cap from April 2026. | 100% BPR on qualifying EIS/SEIS shares; unlimited. Combined with 30%/50% income tax relief and CGT benefits — very tax-efficient. | £1m combined cap applies. EIS/SEIS above £1m of qualifying BPR assets: 50% BPR only → 20% effective IHT rate on excess. Still very tax-efficient given the other reliefs (income tax, CGT) but no longer fully IHT-exempt above £1m. |
Business Property Relief IHT 2026 UK. BPR: ss103-114 IHTA 1984. APR: ss115-124 IHTA 1984. Finance Act 2026: £1m combined BPR/APR cap from 6 April 2026. First £1m qualifying assets: 100% relief (unchanged). Above £1m: 50% relief (20% effective IHT rate: 50% × 40%). BPR 100%: unquoted trading company shares (including AIM — s105(1)(bb) IHTA); unquoted trading partnership interests. BPR 50%: quoted controlling interest; land/buildings/machinery used personally in qualifying company. APR 100%: qualifying agricultural property (farmland, farmhouses 'of appropriate character' — HMRC IHTM24190); let farmland (ATA 1995 tenancies) or owner-occupied farmland. 2yr minimum holding: ss106-108 IHTA. 7yr minimum for let agricultural property (s117 IHTA). Qualifying trade: s105(3) IHTA — not mainly investment; genuine trading business. AIM: not 'recognised stock exchange' (FA 2014) → qualifies as unquoted for BPR. Development value: not covered by APR; full IHT. Instalment option: s227 IHTA — 10 annual instalments on qualifying property; interest on outstanding amounts (s233 IHTA). IHT400 filed with IHT412 (BPR) and IHT413 (APR). April 2027 pension reform: DC pensions into IHT estate — further increasing BPR/APR-affected estates. EIS/SEIS: qualify for BPR as unquoted trading company shares; also income tax relief (30%/50%) and CGT reliefs. NRB £325k (s8C IHTA — frozen to April 2030). RNRB £175k (s8D IHTA — lineal descendants). IHT interest rate: HMRC late payment rate (8.75% as of June 2026).
Business Property Relief 2026: Complete Guide
The £1 million combined BPR/APR cap — what it means and how it works
From 6 April 2026, a £1 million combined cap applies to all BPR and APR relief across an estate. The mechanics: the executor adds together all assets in the estate that qualify for either BPR (ss103-114 IHTA 1984) or APR (ss115-124 IHTA 1984). The first £1m of those qualifying assets receives 100% relief — no IHT, same as before April 2026. Assets above £1m that qualify for BPR or APR receive 50% relief — reducing their chargeable value by 50%, not 100%. The effective IHT rate on qualifying assets above £1m: 50% of the qualifying value is chargeable × 40% IHT rate = 20% effective rate. The £1m cap is: (a) combined — BPR assets and APR assets share the same £1m allowance; (b) per estate — not per person, not per asset; (c) per death — there is no taper of the £1m cap over time. After the BPR/APR relief is applied (with the cap), the remaining chargeable estate is then reduced by the NRB (£325k), RNRB (£175k if applicable), and any other exemptions before calculating the final IHT bill. Interaction with the NRB: the £1m cap on BPR/APR and the NRB (£325k) can both reduce the IHT bill, but they are calculated sequentially. The estate is first reduced by BPR/APR (with the new cap), then the NRB is applied to the remaining chargeable estate. On a £2m farm with no other assets: APR on £1m (100%) + APR on £1m (50% → £500k chargeable) = £500k chargeable. NRB: £500k − £325k = £175k × 40% = £70k IHT. A major change from the pre-2026 position of £0 IHT.
Impact on family farms and agricultural businesses — the human cost of the cap
The April 2026 BPR/APR cap has the most significant impact on family farms and agricultural estates. Before the cap: a farm valued at £5m was fully exempt from IHT under APR. The farm could pass intact to the next generation with no IHT bill. After the cap: a £5m farm faces an IHT bill of up to £1.14m (£5m farm: £1m @ 0% APR; £4m @ 50% = £2m chargeable; £2m − NRB £325k − RNRB £175k = £1.5m × 40% = £600k IHT — using all available thresholds). For farms between £1m and £2m, the IHT exposure is lower but still significant: £2m farm: £1m @ 0%; £1m × 50% = £500k chargeable; £500k − £325k NRB = £175k × 40% = £70k IHT. For the many farms that have been in the same family for generations, this IHT bill may be unaffordable without selling farmland, buildings, or equipment — breaking up the farm or forcing it out of the family. The instalment option (s227 IHTA) allows IHT on qualifying agricultural and business property to be paid in 10 equal annual instalments — spreading the cost, with interest on unpaid balances (at the HMRC late payment interest rate). This is likely to become the most used relief for farm families facing the new IHT burden.
AIM shares and IHT planning after April 2026 — the changed landscape
Before April 2026, AIM-listed shares in qualifying trading companies received 100% BPR — making them a popular IHT planning tool. Wealth managers offered 'AIM IHT portfolios' specifically designed to shelter large amounts from IHT with only a 2-year holding period. The April 2026 cap means that AIM IHT portfolios above £1m of qualifying assets are no longer fully exempt. For estates with £1m+ of qualifying BPR/APR assets: AIM shares above the cap face 20% effective IHT. For estates with less than £1m of qualifying BPR/APR assets: AIM shares up to the cap remain 100% exempt — the cap only bites above £1m. The AIM strategy remains useful for: bridging to the £1m cap (using AIM shares to fill the cap when combined BPR/APR total is below £1m); providing liquidity within a broader IHT plan; combining with other IHT strategies (lifetime gifts, life insurance in trust) to reduce the overall IHT burden. Investors and wealth managers are rebalancing AIM IHT portfolios in response to the cap — including diversifying into EIS/SEIS (which offer additional income tax and CGT reliefs alongside BPR) and VCT investments. The 2-year holding period for BPR remains; shares sold or given away within 2 years before death do not attract BPR.
April 2027 pension reform — a compounding effect on estates with BPR/APR assets
From April 2027, undrawn DC pension pots will be included in the IHT estate (Finance Act 2025 announcement; confirmed 2026). This creates a compounding effect for estates that also hold BPR/APR qualifying assets. Before April 2027: a farm worth £3m + pension pot £500k; pension is outside the estate → total IHT estate = £3m (all APR qualifying, with £1m @ 0% and £2m @ 20%). After April 2027: the same farm + pension. Pension (£500k) is now IN the estate for IHT → total estate = £3.5m. BPR/APR cap £1m: £3m farm @ £1m cap + pension £500k (NOT qualifying for BPR/APR). Chargeable estate: £3m − £1m (APR @ 100%) − £1m × 50% = £500k (from farm) + £500k pension = £1m chargeable. After NRB etc. the IHT bill increases substantially. For farming families and business owners: the combination of the BPR/APR cap (from April 2026) and the pension reform (from April 2027) means that IHT planning that was adequate before 2026 may be significantly inadequate by 2027. Professional estate planning review is essential.
Planning strategies for BPR/APR estates above £1 million
For estates above the new £1m BPR/APR cap, several planning strategies can reduce the overall IHT exposure: (1) Lifetime gifts of qualifying assets (PETs — s3A IHTA): giving qualifying business or agricultural assets to children during lifetime starts the 7-year PET clock. If the donor survives 7 years: the gifted assets leave the estate entirely (no BPR/APR cap issue). The donee takes the assets without IHT at the time of gift, and with a base cost equal to market value at gift for CGT purposes (possible CGT on gift — holdover relief s165 TCGA 1992 may apply for business assets). (2) Instalment option (s227 IHTA): IHT on qualifying agricultural/business property can be paid in 10 annual instalments after death — preventing forced asset sales. Interest accrues on unpaid instalments. (3) Will structuring: ensure assets above £1m are also supported by NRB, RNRB, and other exemptions; consider leaving some qualifying assets to charity (s23 IHTA) to reduce the chargeable estate; consider whether the 36% rate (s36 IHTA — ≥10% of baseline to charity) applies. (4) Trust planning: Business Property Trusts or Agricultural Property Trusts created during lifetime — care needed on the BPR/APR rules within trust structures (periodic charges s64 IHTA; exit charges s65 IHTA). (5) Life insurance: a whole-of-life policy written in trust can provide funds to meet the new IHT bills without asset sales. Premiums from surplus income may be immediately exempt under s21 IHTA.
Frequently Asked Questions
What is the new £1 million Business Property Relief cap from April 2026?
From 6 April 2026 (Finance Act 2026), a £1 million combined cap applies to Business Property Relief (BPR — ss103-114 IHTA 1984) and Agricultural Property Relief (APR — ss115-124 IHTA 1984) in any estate. The first £1m of qualifying BPR + APR assets in the estate receives 100% relief — no IHT, same as before. Assets above £1m that qualify for BPR or APR receive 50% relief only — making 50% of those assets' value chargeable to IHT. The effective IHT rate on qualifying assets above £1m: 50% × 40% = 20%. Example: £3m farm: £1m @ 0% (APR, 100%) + £2m @ 50% (APR) = £1m chargeable; after NRB and RNRB: substantial IHT bill. Before April 2026: the same £3m farm would have had £0 IHT.
Do AIM shares still qualify for Business Property Relief after April 2026?
Yes — AIM shares in qualifying trading companies still qualify for 100% BPR as 'unquoted' shares (s105(1)(bb) IHTA) after April 2026. However, the new £1m combined BPR/APR cap means that AIM shares above the cap now receive only 50% BPR (20% effective IHT rate) rather than 100%. For estates with less than £1m of total qualifying BPR and APR assets: AIM shares remain fully (100%) BPR-exempt. For estates with more than £1m of qualifying BPR/APR assets: AIM shares above the cap face 20% IHT. The 2-year minimum holding period for BPR (ss106-108 IHTA) continues to apply. AIM shares must be in a genuine qualifying trading company (not an investment company or property company).
What happens to Business Property Relief on farm property after April 2026?
Agricultural Property Relief (APR — ss115-124 IHTA 1984) continues to apply to qualifying farmland, farmhouses, and farm buildings — but is now subject to the £1m combined BPR/APR cap from April 2026. Before the cap: a £4m farm was fully exempt (100% APR; £0 IHT). After the cap: a £4m farm: £1m @ 0% APR + £3m × 50% APR = £1.5m chargeable; £1.5m − NRB £325k = £1.175m × 40% = £470k IHT. The instalment option (s227 IHTA) allows IHT on qualifying agricultural property to be paid in 10 annual instalments — preventing forced farm sales. Development value of farmland above agricultural value was never covered by APR and remains subject to full IHT. The cap is combined — BPR and APR assets together share the same £1m allowance.
How do I calculate IHT after Business Property Relief with the new cap?
Step 1: identify all assets in the estate qualifying for BPR or APR. Step 2: total them — this is the qualifying pool. Step 3: apply 100% relief to the first £1m of the qualifying pool. Step 4: apply 50% relief to the qualifying pool above £1m. Step 5: add the partially relieved qualifying assets (50% of value above £1m) to the non-qualifying estate to get the total chargeable estate. Step 6: deduct the NRB (£325k), RNRB (£175k if applicable), tNRB (if applicable), tRNRB (if applicable), spousal exemption (s18 IHTA), and charitable bequests (s23 IHTA). Step 7: multiply the remaining chargeable estate by 40% (or 36% if ≥10% to charity). Example: qualifying BPR (AIM) £1.5m + qualifying APR (farmland) £0.5m = total qualifying £2m. Cap: £1m @ 0%; £1m × 50% = £500k chargeable from BPR/APR. Add non-qualifying assets (cash, investments): £300k. Total chargeable: £800k. Deduct NRB: £800k − £325k = £475k × 40% = £190k IHT.
Was there any transitional relief for existing BPR/APR assets before April 2026?
The Finance Act 2026 did not include specific transitional provisions protecting existing BPR/APR assets above the cap that were held before 6 April 2026. The cap applies to deaths occurring on or after 6 April 2026, regardless of when the assets were acquired. Assets acquired before April 2026 that would previously have attracted unlimited 100% BPR/APR now face the cap if the holder dies after 6 April 2026. The 2-year minimum holding period still applies — assets acquired less than 2 years before death do not attract BPR/APR at all (ss106-108 IHTA). For those who relied on BPR/APR for full IHT exemption: the position has changed fundamentally; professional estate planning advice is urgently needed. Life insurance, lifetime PETs, and will restructuring can all help manage the new IHT exposure above £1m.
BPR/APR Changed in April 2026 — Your Will Needs to Reflect That
Business owners and farmers face new IHT exposure above £1m. Your will should be reviewed in light of the Finance Act 2026 changes. WillSafe will kits from £39.99.
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