Business Property Relief: December 2025 update
This post updates my earlier analysis of the planned reforms to Business Property Relief (BPR) set out in our report, Business Property Relief and Family Firms in the UK: From Relief to Reform, and our December commentary, Budget 2025 and Business Property Relief. It focuses on what changed in the Government’s December 2025 announcement of further changes to its policy on BPR and what this means for UK family businesses.
What changed in December 2025?
On 23 December 2025, the Government announced (in its press release on raising the inheritance tax relief threshold to £2.5m) a further change to the reforms due to take effect from 6 April 2026: the threshold at which the 100% rate of relief applies will be increased from £1 million to £2.5 million. 50% relief will continue to apply to qualifying assets above that threshold.
According to HMRC’s policy paper on the changes to APR and BPR, the allowance is a single 100% relief allowance applying to the combined value of property in an estate qualifying for 100% BPR and/or 100% APR (rather than separate allowances). The December 2025 announcement increases the size of that allowance to £2.5 million when the reforms are implemented in April 2026.
As explained in our December commentary on the 2025 Budget, that Budget introduced transferability of any unused part of the £1 million allowance between spouses and civil partners. The Government has confirmed (see 5 January 2026 Written Ministerial Statement HCWS1218) that transferability continues to apply alongside the higher £2.5 million allowance.
What is the impact of the December change?
The latest House of Commons Library briefing Changes to agricultural and business property reliefs for inheritance tax published in January 2026 usefully sets out how HMRC’s static estimates of the number of estates expected to pay more inheritance tax have changed as the policy has been amended. For “estates containing a BPR claim only” (a category that can include some unlisted-share BPR claims, but excludes estates whose only BPR claim is on “not listed” shares such as AIM shares), HMRC’s estimate for 2026–27 has been revised down from 500 estates (July 2025) to 325 (November 2025/Budget 2025), and then to 220 (following the December 2025 change increasing the 100% relief allowance to £2.5m). The briefing also emphasises that these are static estimates that do not allow for behavioural change, and notes that the December 2025 costing had not yet been considered by the OBR at the time of publication.
The Written Ministerial Statement HCWS1218 (5 January 2026), states that, excluding estates only holding shares designated as “not listed”, up to 220 BPR-only estates will pay more inheritance tax in 2026–27. This implies that just over 80% of such estates will not pay any more tax. The Government’s 23 December press release similarly notes that the number of BPR-only estates affected will fall by a third.
The table below summarises how the forecast number of affected estates has shifted following the November and December 2025 changes, compared with the original proposal. The number of estates forecast to pay more inheritance tax under the reforms in 2026-27 fell from around 2,000 to around 1,400 after the Budget 2025 change to allow spousal transferability, and then to up to 1,100 after the cap for 100% relief was raised to £2.5 million.
| Forecast | Policy context | Reason for change | Source |
|---|---|---|---|
| Approximately 2,000 estates (Autumn Budget 2024) | Original proposal to cap 100% APR/BPR relief at £1m per estate, with no spousal transferability | Without any mitigation, HMRC’s static modelling suggested that about 2,000 estates would pay more IHT. This included ~520 estates with APR claims and ~500 estates with only BPR claims, plus ~1,000 estates whose BPR claim was solely for unlisted shares. | House of Commons Library briefing (Masala, Keep & Seely, 2026) |
| Approximately 1,400 estates (Budget 2025, 26 Nov 2025) | Budget introduced transferability of the £1m allowance between spouses/civil partners | Allowing unused allowance to transfer reduced the number of estates affected to about 1,400. HMRC’s policy paper states that, based on updated administrative data and including spousal transferability, around 1,400 estates would pay more, comprising up to 375 APR+BPR estates and up to 1,025 BPR-only estates (of which ~700 held only “not listed” shares). | HMRC (2025) |
| Approximately 1,100 estates (December 2025) | The December announcement increased the 100% relief allowance to £2.5m per estate, while keeping spousal transferability | Raising the threshold means fewer estates exceed the cap. The Government’s December press release says the reforms are now expected to result in up to 1,100 estates paying more IHT in 2026-27, down from around the 2,000 initially estimated. Within the 1,100 figure, the number of estates claiming APR (including BPR) is forecast to drop from 375 to 185, and BPR-only estates (excluding those only holding AIM shares) forecast to drop from 325 to 220. | December 2025 press release; Written Ministerial Statement. |
What did not change in December?
The December change increases the main “100% relief” allowance, but it does not remove other elements of the reform package already announced. In particular, HMRC’s policy paper confirms:
the planned reduction in the rate of BPR from 100% to 50% for “not listed” shares; and
the extension of the option to pay IHT by equal annual instalments over 10 years interest-free to all property eligible for BPR (and APR).
Legislative route and timing
The Written Ministerial Statement HCWS1218 states that the increase to the allowance will be reflected in a Government amendment to the Finance (No. 2) Bill. The Committee of the whole House for the Finance (No. 2) Bill is scheduled for 12 and 13 January 2026. Clause 62 and Schedule 12, which cover APR and BPR, are listed for debate during this stage (UK Parliament, 2025).
The Government’s reforms to BPR and APR have evolved since October 2024. The December announcement will be relevant for some family businesses and does not remove the need to review planning where business assets substantially exceed the new allowance(s).
The FBRF will continue to track the legislation as it progresses. For background, evidence and analysis of the wider reform package, please refer to the FBRF report and Budget 2025 commentary (published 2 December 2025), linked at the top of this post.
Sources
HM Revenue & Customs (HMRC) (2025) Agricultural property relief and business property relief changes (policy paper), 26 November. Available at: https://www.gov.uk/government/publications/changes-to-agricultural-property-relief-and-business-property-relief/agricultural-property-relief-and-business-property-relief-changes
HM Treasury; Department for Environment, Food & Rural Affairs; Department for Business and Trade (2025) Inheritance tax reliefs threshold to rise to £2.5m for farmers and businesses (press release), 23 December. Available at: https://www.gov.uk/government/news/inheritance-tax-reliefs-threshold-to-rise-to-25m-for-farmers-and-businesses
Masala, F., Keep, M. and Seely, A. (2026) Changes to agricultural and business property reliefs for inheritance tax. House of Commons Library Research Briefing CBP-10181. Available at: https://commonslibrary.parliament.uk/research-briefings/cbp-10181/ (Accessed: 6 January 2026).
UK Parliament (2025) Finance (No. 2) Bill: latest news. Available at: https://bills.parliament.uk/bills/4042/news (Accessed: 8 January 2026)
UK Parliament (2026) Inheritance tax: agricultural property relief and business property relief (Written Ministerial Statement HCWS1218), Statement made on 5th January. Available at: https://questions-statements.parliament.uk/written-statements/detail/2026-01-05/hcws1218
UK Parliament, House of Commons (2026) Finance (No. 2) Bill: Notices of Committee of the whole House Amendments as of 5th January 2026 (Amendment Paper), 5 January. Available at: https://publications.parliament.uk/pa/bills/cbill/59-01/0342/amend/finance2_rm_cwh_0105.pdf