The changes to Business Property Relief (BPR) that come into force on 6 April 2026 are fast approaching. There is however still time to mitigate your exposure to IHT and the potential impact of the new regime.
For a full summary of the changes coming into effect, please see our previous article here. By way of brief summary, the changes will mean that from 6 April 2026 a cap will be introduced on the total value of property on which BPR can be claimed at a rate of 100%. The subsequent changes announced on 23 December 2025, mean that the 100% relief will be available on up to £2.5million of qualifying business assets and anything above this will be limited to a 50% relief.
The introduction of this threshold is likely to result in more individuals having a sizeable IHT bill on their passing. There is, however, still time to utilise the current regime related to BPR before the 6 April 2026, and this could include making lifetime gifts of company shares or redirecting those assets into a trust.
Let us consider an example of gifting assets to a trust:
An individual currently holds unquoted shares valued at £8,000,000 in their personal name. The unquoted shares have been held by the individual for over two years and meet the requirements and therefore would qualify for BPR at a rate of 100%.
The gift to the trust is made before 6 April 2026:
If the individual was to set up a trust (for the benefit of their children, for example) and make a gift of the total value of the unquoted shares which qualify for BPR before 6 April 2026 into this trust, the value chargeable to IHT on the entry of the assets into the trust would be zero as the gift qualifies for BPR in full. The individual would have therefore made a gift removing the assets from their estate without any immediate IHT charge.
The gift to the trust is made after 6 April 2026:
If, however, the same individual was to make a gift into the trust after 6 April 2026, only the first £2,500,000 would qualify for relief at the 100% rate. The remaining £5,500,000 would benefit from relief at a rate of 50%, leaving £2,750,000. After deducting the Nil Rate Band of £325,000, this leaves £2,425,000 which is subject to a lifetime IHT rate of 20%, meaning that the IHT payable upon putting these assets into trust is £485,000. In effect, this will be 10% of the value of the transfer in excess of £3,150,000 (assuming the Nil Rate Band is available in full).
Tax on Death
In either case, if the individual dies within seven years of the transfer, the gift would potentially be subject to tax upon death at the full 40% rate of IHT. If that death takes place from 6 April 2026, the new restrictions on BPR will apply, even if the gift was made before that date.
What Should I Do?
At the time of publication, there is still just about time to explore the options to mitigate your exposure to IHT in relation to your qualifying business assets. Whilst making a gift to a trust for example could result in no immediate IHT implications, anyone looking to make those gifts should be aware of the potential implications if they were to die within seven years of making this gift as well as the ongoing tax liability in relation to the assets being held within the trust. Further planning to consider therefore could be term life insurance policies which could pay out to cover the IHT due in the event of death within seven years. Alternatively, whole of life policies could be used to provide a payment on death to cover the IHT due on a business. When creating trusts, it is also worth considering whether it is possible to split the gift with a spouse or civil partner, in order to make the most of both parties’ allowances.
If you are planning to utilise BPR as part of your succession plan before the changes on 6 April 2026, please do contact the Private Wealth and Tax team at Quastels.
