Budget changes – Restrictions on BPR/APR – What does it mean for me?

The budget introduced a restriction on what formerly qualified for 100% Business Property Relief (BPR) and Agricultural Property Relief (APR). Under the new rules, only £1 million of qualifying assets would obtain the benefit of the 100% relief, the balance only qualifying for 50% (so effectively subject to 20% Inheritance Tax).

Firstly, it is worth considering the value of your shares/business, to see if you would actually breach the £1 million limit. Valuations are regarded as more an art than a science, as different valuers can often provide different values. The values can also be different in different years based on the business status in those years, and for different purposes (e.g. if the business is being value for sale or probate). Gary Brown’s article on this in a previous Enews provides more information on this: Business Valuation: Knowing your business’s worth

If the value of the APR/BPR assets is less than £1 million, this is good news in terms of the BPR qualification, although note that the inclusion of the BPR/APR assets in the gross estate could still breach the £2 million threshold, above which the residence nil rate band begins to taper, disappearing completely once the estate exceeds £2.35 million.

In both situations (estate over £2 million and BPR/APR qualifying assets breaching £1 million) there are two potential options available to you:

1 – Gift the assets during your lifetime

2 – Transfer assets to your spouse during lifetime and pass down to children (rather than the surviving spouse) in your will.

Gifting assets means they are outside of your estate, immediately, when considering the £2 million threshold. Even if you don’t survive for 7 years, there can therefore still be an Inheritance Tax saving in the form of the residence nil rate band. You should not forget Capital Gains Tax though, as a gift is a deemed disposal at market value. Holdover relief may be available, but the ‘trade’ test for Capital Gains Tax is set much higher than for Inheritance Tax.

Transferring to a spouse during lifetime can also be helpful as this could enable you to double the £1 million (as you would have £1 million of BPR/APR available each). Unlike the nil rate band and residence nil rate band, there are no provisions (at least currently) to enable the transfer of the BPR/APR £1 million to a spouse.

Finally, it is worth noting that the changes don’t take effect until 6 April 2026. For any deaths in the meantime therefore, 100% qualification is still available.

If you would like assistance in valuing your business please email Gary Brown or call on 023 8046 1240. If you would like to discuss the BPR/APR changes further, or would like to complete an Inheritance Tax review, please contact Gemma Hedges on 023 8046 1259 or email Gemma Hedges.