| Applies since | 6 April 2026, enacted in the Finance Act 2026 |
| 100% relief | up to £2.5 million of business and agricultural property together, per person |
| Above that | 50% relief |
| Spouses | unused amount transferable, together up to £5 million |
| AIM shares | always 50% only; they do not use up the £2.5 million |
| Payment | possible in ten interest-free annual instalments |
| Holding period | at least 2 years |
| Updated | November 2026; Budget 2026 gives the £2.5 million for 2027/28 too |
What business property relief is
Business relief reduces the value of business property for UK inheritance tax, by either 100% or 50%. Full relief applies to a business or an interest in one and to shares in unlisted companies, typically the family limited company. 50% applies, for example, to a holding giving more than 50% of the votes in a listed company. The deceased almost always needs to have owned the property for at least two years.
Agricultural property relief works similarly for farmland, farm buildings and farmhouses. Since March 1992 both reliefs could reach 100%, with no cap. That is exactly what has changed.
The new cap: £2.5 million, then 50%
Since 6 April 2026 the 100% relief for business and agricultural property together applies only up to £2.5 million per estate. Anything above is relieved at 50%. With a 40% rate, that means an effective 20% tax on the part above the cap. The ordinary £325,000 nil-rate band and the residence nil-rate band come on top, as described in UK inheritance tax.
The road there was bumpy. In the autumn Budget 2024 the government announced a £1 million cap. Budget 2025 added transferability between spouses, and on 23 December 2025 the cap was raised to £2.5 million. The whole thing is enacted in section 65 of the Finance Act 2026. The Budget of 28 October 2026 changed nothing and carries the £2.5 million into the 2027/28 tax year.
An example: a business owner leaves shares in her UK family company worth £4 million. £2.5 million is fully relieved, the remaining £1.5 million by half. £750,000 stays taxable, which at 40% gives £300,000, assuming her nil-rate band is used elsewhere. Her estate may pay that tax interest-free over ten years rather than sell the company.
Spouses: together up to £5 million
The surviving spouse or civil partner can take over the unused part of the £2.5 million. A couple can thus pass on up to £5 million of business or agricultural property free of tax, and with the two nil-rate bands of £325,000 each, £5.65 million. If the first partner died before 6 April 2026, they are treated as having transferred the full £2.5 million. The transferred amount must be claimed: within four years of the second death or six months after the executor takes office, whichever is later.
AIM shares: half a solution
For years a portfolio of shares on the London Stock Exchange's Alternative Investment Market was a popular way to put wealth beyond inheritance tax after two years. Since April 2026, shares on markets that HMRC does not treat as listed, such as AIM, get only 50% relief, whatever the amount. In exchange they use up none of the £2.5 million. An AIM portfolio still reduces inheritance tax, but only from 40% to an effective 20%.
Gifts, trusts and paying by instalments
The new rules also reach back to gifts: anyone who gave business property from 30 October 2024 and dies within seven years, from 6 April 2026, falls under the cap. How the seven-year rule works is in gifts and the seven-year rule.
Trusts have their own £2.5 million cap for business and agricultural property. For trusts that existed before 30 October 2024, the new rules bite from the first ten-year anniversary after 6 April 2026. More on trust taxation in trusts.
A comfort for anyone above the cap: the tax on all property qualifying for business or agricultural relief can be paid in equal annual instalments over ten years, interest-free. The business does not have to be sold to pay the tax.
For business owners living abroad
If you are not a long-term UK resident, you pay UK inheritance tax only on UK assets. Shares in a UK limited company are UK assets, and the new cap applies to them just the same. So for a business owner abroad with a UK subsidiary, BPR is no foreign word. At home, relief for business property follows that country's own rules, and only a few countries have an estate tax convention with the UK. Work out both sides separately; the treaty mechanics are in the UK's tax treaties.
Frequently asked questions
What does BPR mean?
BPR stands for business property relief, now usually called business relief. It exempts business property from UK inheritance tax: 100% up to £2.5 million together with agricultural property, 50% above.
Do AIM shares still get business relief?
Yes, but only 50%. Since 6 April 2026 AIM shares and other securities not treated as listed by HMRC always count as 50% property. They do not use up the £2.5 million.
Is the £2.5 million cap law?
Yes. It is in the Finance Act 2026 and applies to deaths from 6 April 2026. The Budget of 28 October 2026 carries the same amount into 2027/28.
Can I use my late spouse's £2.5 million?
Yes, the unused part. If your partner died before 6 April 2026, the full £2.5 million is treated as transferable. The claim runs through the executor.
Sources: GOV.UK: Agricultural property relief and business property relief changes (TIIN); GOV.UK: Business Relief for Inheritance Tax; GOV.UK: Agricultural Relief on Inheritance Tax; GOV.UK: Work out how to apportion Agricultural and Business Relief; legislation.gov.uk: Finance Act 2026; GOV.UK: Budget 2026, Overview of tax legislation and rates, Annex A; GOV.UK: How Inheritance Tax works
