Business Property Relief (BPR) really helps soften the blow of inheritance tax on family businesses. so family businesses can pass on to the next generation without breaking the bank. Lets take a closer look at what makes BPR tick, which assets qualify and how you can make the most of it.
Key Takeaways
- Business Property Relief (BPR) is a real life saver when it comes to inheritance tax on qualifying business assets – especially for family run businesses.
- As of April 2026 some big changes are on the table with new relief rates and eligibility requirements so its really important to keep on top of estate planning to make the most of BPR.
- Getting your estate planning right (like making sure you’re gifting business assets at the right time and having a good chat with a tax pro) can make all the difference in getting the most out of BPR.
Understanding Business Property Relief (BPR)
Business Property Relief (BPR) is a godsend for family businesses looking to keep their business in the family. Its a relief that lets family businesses pass on without the burden of inheritance tax (IHT). designed to help family businesses keep on running by reducing the IHT that you have to pay on business assets, BPR can be a life line for businesses.
Estate planning is really important for getting the most out of Business Property Relief (BPR) and allowing families to pass on wealth without breaking the bank.
What is BPR?
For a business, BPR means you can pass it on without having to worry about inheritance tax (IHT). BPR reduces the value of business property for IHT, so its a big help in keeping assets in the family.
Family businesses can use BPR to cut down on IHT by owning and actively running a business.
Types of Qualifying Business Assets
Assets that count for BPR include:
- Trading business assets – typically this means controlling shares in private companies
- Trading company interests
- Shares in unlisted companies which can provide a lot of potential points for getting 100% Business Relief
Land and equipment used to run the business can also qualify for BPR.
Ownership Period Requirements
Generally, you need to have owned the asset for at least 2 years to get BPR. And even if a property was inherited, it can still qualify for BPR even if its past the 2-year mark.
Typically you need 2 years of ownership to qualify for BPR, but there are some exceptions.
Key Changes to BPR Effective April 2026
Big changes to Business Property Relief (BPR) are coming in April 2026. Business owners need to be ready for this. They should keep an eye on the changes so they can comply and keep on getting the most out of BPR.
Planning ahead and acting quickly will be essential for adapting to these changes.
New Relief Rates and Allowances
The max value of £1m is now the rule for 100% relief under BPR. Any amount above this will have a reduced relief rate.
If you own shares on a stock exchange that arent listed then youll qualify for 50% relief under unquoted companies BPR.
Changes to Agricultural Property Relief
Agricultural property that qualifies will still be eligible for relief after the changes in April 2026. Farms can even qualify for both Agricultural Property Relief and Business Property Relief – which will ease up IHT burden on agricultural businesses.
Farming businesses can benefit from both Agricultural Property Relief and Business Property Relief which can reduce IHT by a lot – especially where the business and a property are operated together.
Impact on Trusts and Lifetime Transfers
Trusts with qualifying business assets might need to be looked at differently under the new BPR rules from April 2026. Trustees will have the £1m allowance to use when calculating relief at the 10-year anniversary for property held in relevant property trusts.
Its only by updating your will with the latest BPR rules that you can make the most of IHT relief.
Relevant Business Property Explained
Relevant business property includes assets that are used in trading rather than investment activities. A business needs to show it is primarily focused on trading and not investment. Typically sole traders and partnerships qualify for full BPR if they run for profit as a trading business.
A family business can qualify for up to 100% BPR if it meets certain trading criteria.
Trading vs. Investment Businesses
Businesses that are mainly focused on making a profit and not investment are trading businesses. Sole traders and partnerships should get full BPR if they are operating for profit as a trading entity. A family business can qualify for up to 100% BPR if it meets trading activity criteria.
Land and buildings used by a business can qualify for 50% BPR.
Excepted Assets
Assets that have not been used in the business for 2 years before the transfer are classed as excepted assets. If a business uses something that is not needed for business but is still kept, that is classed as surplus cash and wont get Business Property Relief. An excepted asset is not eligible for this relief.
Excessive cash beyond business needs is called surplus cash and wont get Business Property Relief.
Practical Applications of BPR
Business Relief can really chop down IHT bills, and that can be a game-changer for businesses. Getting some expert advice from a tax pro and financial advisor will help navigate the complexities of BPR and make sure your estate is well managed.
Gifting Business Assets
Gifts of business assets qualify for Business Property Relief (BPR) if the donor has been the owner for a couple of years beforehand – it’s a key bit of information to have when thinking about estate planning and getting the most tax relief possible.
Replacement Property Rules
You can keep getting BPR for business assets as long as the new ones continue to serve a useful purpose for the business. To keep qualifying for BPR, the replacement property has to keep doing what the original assets were doing to get relief.
Interaction with Other Reliefs
When you combine BPR with other inheritance tax reliefs, like the Residence Nil Rate Band (RNRB), it can have a big impact on how much tax you end up paying. Using a combination of reliefs can really make your estate plan more tax efficient.
Common Pitfalls and How to Avoid Them
If you make a gift of business assets within 7 years before you die, then the recipient might end up paying unexpected inheritance tax if they sell the asset. Keeping an eye on your assets and making sure they still qualify for BPR is really important.
Clawbacks on Lifetime Gifts
If you die within 7 years after making a gift, the taxman might claw some of it back, and that can really affect your overall inheritance tax bill. And if you die within that 7 years, the new rules for BPR might even make the gift lose its relief.
Debts and Liabilities
When you’re working out how much business assets are worth, you need to take into account any debts that are tied to them. If there are secured debts on the business assets, you need to factor them out when you’re calculating how much relief you can get.
Case Studies and Examples
Business Property Relief (BPR) really works in real life – there are loads of examples out there of people who have used BPR to reduce their inheritance tax bill. These examples show just how important it is to know the rules and how they apply to your business.
Family-Owned Business
A family-owned company made some smart changes to get BPR and ended up saving the owner around £250,000 in inheritance tax. They’d structured their business to get 100% Business Relief.
The family-owned business made some adjustments to get the full 100% Business Property Relief.
Agricultural Property
Agricultural Property Relief (APR) is a part of BPR that can really cut inheritance tax on farms and agricultural land. Recent changes have made it easier to claim APR and more straightforward to work out whether you qualify.
Preparing for the Future
Big changes are coming to BPR as of April 2026, and that could affect how assets are valued for inheritance tax. It’s a good idea to get some advice from a professional to make sure you’re on top of it all.
And of course, always reviewing and updating your will is a good idea, especially when tax laws and regulations change.
Reviewing and Updating Wills
You should have a good look at your will every so often to make sure it still reflects the latest tax laws and your current estate planning strategy. It’s a good idea to get it reviewed and updated when the BPR rules change.
Consulting with Professionals
If you’re running a business, getting some expert advice on your estate planning can really help you make the most of the reliefs available. You can also get help on how to avoid unexpected inheritance tax charges.
Summary
So there you have it – the key points about Business Property Relief are pretty straightforward. But to get the most out of it all, you need to understand how it works and how to apply it to your business. Now go out there and get planning for the future!
Frequently Asked Questions
What is the business property relief?
Business property relief is an important inheritance tax relief that allows business owners to obtain either 100% or 50% relief on their business assets, contingent on specific conditions, and it becomes available after an ownership period of two years. This relief can significantly reduce the tax burden on inherited businesses.
What is Business Property Relief (BPR)?
Business Property Relief (BPR) permits the transfer of business assets without incurring inheritance tax, thereby considerably alleviating the tax burden on estates.
What types of assets qualify for BPR?
Assets that qualify for Business Property Relief (BPR) include trading business assets, unlisted company shares, land, machinery, and any assets integral to business operations.
What are the ownership period requirements for BPR?
To qualify for Business Property Relief (BPR), an asset must typically be owned for a minimum of two years prior to transfer; however, inherited assets may qualify without this duration requirement.
How will the changes effective April 2026 impact BPR?
The changes effective April 2026 will introduce a new relief limit of £1 million for 100% Business Property Relief (BPR), update Agricultural Property Relief, and alter the tax treatments for trusts that hold qualifying business assets. These adjustments will significantly affect the planning and structuring of business assets for tax efficiency.