The relief restrictions to Agricultural and Business Property (APR and BPR) first announced 2024, included the introduction of a new APR/BPR allowance from 6 April 2026 to which 100% relief will apply, with any remaining qualifying property benefitting from a lower 50% relief. On 23 December 2025 it was announced that this allowance would be increased from £1 million to £2.5 million per individual.
The Finance Act 2026 received royal assent on 18 March, confirming that the £2.5 million allowance will be transferable between spouses as for other Inheritance Tax (IHT) allowances. This means that those with qualifying assets of around £5 million mark should be able to pass them IHT-free to the next generation. This relaxation will be welcomed by many, but larger family-owned businesses will still have the potentially significant problem of significant generational IHT bills. For example, a business worth £10 million will still imply a seven-figure IHT liability.
From an estates administration angle, these changes have a very real impact on executors who will suddenly find themselves administering estates with significantly higher tax exposures than anticipated. We are already seeing clients whose succession plans, previously watertight under the old APR/BPR rules, now require urgent review. The shift from potentially 100% relief to a capped allowance fundamentally alters how estates should plan for liquidity, timing of transfers, and overall governance of family-owned businesses.
So, many estates which would not previously have had significant IHT liabilities prior to 6 April 2026 are now going to have to grapple with these costs. Doing nothing will begin to look like a problem neglected as these liabilities bite and the technical term ‘estate liquidity’ begins to come into focus. The issue will become just how are these liabilities going to be paid? Part of the answer will be to pay the liabilities in instalments. Another part might be to begin extracting dividends to build up a ‘war chest’. Yet another might be to take out life cover.
Where BPR/APR could previously eliminate the IHT charge, estates may now face a liquidity gap of several million pounds. In practice, this can mean executors needing to sell business assets at a vulnerable moment, negotiate borrowing to meet HMRC deadlines, or apply for instalment options, each of which can create significant pressure during an already challenging period for families.
Life cover premiums can look expensive and feel unnecessary, but if a future tax bill is all but certain then paying out now to receive a certain capital sum at an indeterminable point in the future can look like an affordable option, which might help avoid the forced sale of assets. While life span is unknown, death is a certainty, and a ‘whole of life’ insurance policy can be viewed in simple investment terms. Whole of Life policies are investment products which should be purchased under specific financial advice. Specific tax advice should also be sought to avoid common pitfalls.
For family businesses, the reforms also raise governance considerations: Which shareholders should fund any life cover? Should premiums be paid personally or by the business? Does the family intend to retain the business long term, or does this change accelerate restructuring discussions? These are increasingly frequent themes in our work with business owner clients preparing for succession.
With the legislation now enacted, there is a limited window for clients to take action. Reviewing Wills, shareholder agreements, partnership arrangements and wider succession plans holistically rather than in isolation will be vital to prevent future disputes and ensure the business can continue to operate smoothly following a shareholder’s death.
Please contact your usual Crowe contact if you would like to discuss how this change may affect you and your business.
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