What the Changes to Business and Agricultural Relief Mean for you

Significant changes that were introduced in the October 2024 budget concerned inheritance tax relief on business and agricultural assets, these reliefs are known as Business Relief (BR) and Agricultural Relief (AR).

You will probably remember the campaigning by Jeremy Clarkson in solidarity with farmers across the nation – protests were prevalent due to the rule changes and farmers drove tractors en mass down to parliament. With many needing to sell assets in order to cover taxation costs, forced breakups of small family farms were to be expected since the tax alterations were first announced.

The same is true of small family (non-agricultural) businesses. These rule changes would undoubtedly have an impact on food security and the general health of the UK economy if this were to be case.

After much campaigning and consulting, the Government have reneged slightly, however it’s not a complete U-turn. Whilst the initial cap was set at £1 million per person, in December 2025 it was announced that the cap would increase to £2.5 million, coming into action from 6^th April this Spring. In theory, this should spare more small farms and businesses from the additional tax – of course, many are still going to be caught.

While the protests that were seen focussed more on the farmers, the rule changes would impact small family businesses too and the rest of this article will focus on that area.

What is Business Relief (BR)

Business Relief (BR) is a UK inheritance tax (IHT) relief designed to reduce or eliminate the IHT payable on certain business assets. Its purpose is to prevent the breakup or forced sale of trading businesses when an owner dies, and to encourage investment in privately held, trading‑focused companies.

BR can provide:

100% relief for qualifying unquoted trading businesses or shares
50% relief for certain other business assets (for example, controlling shareholdings in quoted companies or land/buildings used in a qualifying business)

To qualify, the assets must have typically been owned for at least two years, still be held at time of death and must relate to an actively trading business rather than an investment‑focused business. Currently (until 5^th April 2026), there is no limit to the assets that can qualify for business relief.

There are certain changes coming in from 6^th April 2026 which are detailed below:

A new cap of £2.5 million per person (raised from the original £1M) is being introduced for qualifying business and agricultural assets.
Any qualifying assets in excess of £2.5 million will only receive 50% relief.
The allowance is transferrable between spouses either in full or in part meaning up to £5M of share value can be shielded from Inheritance Tax.
Relevant property trusts will have their own £2.5 million 100% relief allowance.
The option to pay IHT on business/agricultural property in interest-free instalments over 10 years remains available.
These are separate allowances from the standard Nil Rate Band (£325,000) and the residential Nil rate Band (£175,000).
Qualifying shares listed on the Alternative Investment Market (AIM) will only receive 50% relief, and this was introduced in the October 2024 Budget.

What are the Financial Planning implications?

The main consideration here is for owners of small qualifying businesses to understand their exposure to the new rules, and to assess what their liabilities would be upon death. By doing so, it would at least give visibility to the problem and thus an opportunity to take the appropriate advice, and a chance to make suitable plans.

The most suitable planning will depend on the business’s direction – whether it’s towards sale, or for succession and the purpose of keeping a business in the family.

Considerations could be made for the gifting of shares to more junior family members or to trust; different share classes can be created to maintain control.

Post sale, seeking advice would be a sensible solution for addressing the value created, and the inheritance tax implication of losing business relief on the sold asset.

Gifts of shares to Trusts can be made up to the £2.5M limit without any immediate inheritance tax implications and could be a useful solution for some.

A simple short-term solution could be to take out an insurance policy on the owners of the shares that can provide liquidity on death, covering the inheritance tax bill once it becomes due.

I have written this article to raise awareness of the underlying issues and upcoming changes. Though some potential solutions have been suggested, this can be a complex area of advice – there may be an additional need to collaborate with legal and tax experts, and if required we are very well connected in this respect.

If these changes are expected to impact and you’d like to discuss your situation, please get in touch with your usual contact at Colmore Partners.

Colmore Partners is an Appointed Representative of Best Practice IFA Group Limited which is authorised and regulated by the Financial Conduct Authority, the registration number is 223112.

This article does not constitute tax, legal or financial advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For guidance, seek professional advice.

The Financial Conduct Authority does not regulate estate planning or tax planning.