Business Property Relief (BPR) changes: Do you need to review your Will?

Budget in 2024 introduced a major change to Business Property Relief (BPR) with several iterations added since. These changes will affect the estate planning for many business owners. From 6 April 2026, full 100% relief will be limited to the first £2.5 million of business assets; any value above that will qualify only for 50% relief.

How will this effect previous planning done by Business Owners in their Will?

Many business owners with taxable estates have historically been advised to leave qualifying business assets to a Business Property Relief (BPR) trust on death. Under the current rules, this planning is highly effective:

• • the transfer into the trust attracts no Inheritance Tax (IHT) due to the 100% BPR.

• • the trustees can then sell or reinvest those assets into non-BPR qualifying investments.

• • the value remains outside the beneficiaries’ estates for future IHT purposes.

This approach still works in principle, but the new BPR rules introduce a significant complication. Where the value of the business assets exceeds £2.5 million, any amount above that cap placed into the BPR trust will now trigger an immediate IHT charge at an effective rate of 20% (reflecting only 50% relief on the current 40% IHT rate).

As with other IHT liabilities, this tax will be due within six months of death and must be paid before a Grant of Probate can be issued. For many estates, this raises a practical problem: how will the trustees or executors fund the tax bill, particularly if the business cannot be sold quickly or if liquidity is otherwise limited?

Do those with BPR planning in their Will need to change it?

Possibly, depending on the value of the business and who is intended to benefit.
If the business is worth more than £2.5 million and the surviving spouse is the main beneficiary; it may be preferable to limit the amount passing into the BPR trust to £2.5 million (the level that still attracts 100% relief). Any excess can then pass directly to the spouse tax-free under the spouse exemption.

This essentially becomes a strategic choice:

• • Pay 20% IHT on first death for amounts over £2.5 million going into a BPR trust, or

• • Defer the tax to second death, where the same value might be taxed at 40% if the asset no longer qualifies for BPR by then.

You must also consider the impact on the overall value of the surviving spouse’s estate. Increasing their estate may reduce access to other IHT reliefs, such as the Residence Nil Rate Band, resulting

Next Steps for Business Owners?

We recommend that clients review any existing BPR planning in their Wills to ensure it remains effective under the new rules. This may involve:

• • Assessing the value of business assets relative to the £2.5 million BPR cap.

• • Considering whether a trust, partial trust, or direct spousal transfer is the most tax-efficient approach.

• • Taking legal and financial advice to ensure their Wills align with their overall estate and succession planning objectives.

To assist, we have prepared a factsheet summarising the BPR changes and practical planning considerations. If you would like to review your existing arrangements, we are here to help.