Until now, where the legal conditions were met, business and agricultural assets could benefit from a full exemption from Inheritance Tax (IHT), with no value limit. The new rules introduce, for the first time, a financial cap on this exemption.
From 6 April 2026, the 100% exemption will apply only up to a total value of £2.5 million per individual, calculated by combining qualifying business assets and qualifying agricultural assets.
Any value above this threshold will still receive tax relief, but the remaining amount will be subject to a reduced IHT rate of 20%, instead of the standard 40%.
The new rules do not apply only on death. The £2.5 million limit will also apply to:
- lifetime transfers that are relevant for IHT, including those made within seven years before death;
- transfers into trust;
- the ten-year charge and exit charges for trusts holding qualifying assets.
The £2.5 million limit is shared between BPR and APR and will be split proportionally if both types of assets are involved.
The rules also allow the transfer of the unused limit between spouses. As a result, a married couple or civil partners may benefit from up to £5 million of qualifying business and agricultural assets fully exempt from IHT.
Transitional rules
The new rules will apply only to events occurring on or after 6 April 2026. For transfers and deaths before that date, the current rules will continue to apply, with a full and unlimited exemption for qualifying assets.
Although BPR and APR are not being removed, the reform represents a major change in approach, especially for high-value estates and trust structures. In many cases, it will be advisable to review existing planning in advance, to assess the impact of the new limit and consider possible alternatives.
Our firm is available to assist clients and families in analysing the new rules and in designing estate and succession planning solutions that are aligned with the new legal framework.
Giacomo Francioni
Alice Pietri – Trust and Wealth
