Budget 2025 and Business Property Relief

PolicyArticleResearch
Written By Martin Kemp

The Chancellor’s 26 November 2025 Budget arrived at a decisive moment for family businesses in the UK. It follows publication of the Family Business Research Foundation’s new report [1], Business Property Relief and Family Firms in the UK: From Relief to Reform , which takes an in-depth look at the reforms to Business Property Relief (BPR) announced in the Autumn 2024 Budget.

Why BPR matters to family firms and policymakers

BPR exists to prevent viable family enterprises being broken up to pay inheritance tax (IHT) on death [1]. The FBRF’s new report shows that BPR has become large in scale (£3.34 billion claimed in 2022–23) and highly concentrated (45 per cent of relief goes to the top two per cent of claims) [1].

What was already decided in the 2024 reform?

The Autumn Budget 2024 introduced a major package of BPR and Agricultural Property Relief (APR) reforms, due to come into effect from 6 April 2026 [2]:

  • A £1 million per person allowance for assets qualifying for 100 per cent relief, with any value above £1 million eligible for only 50 per cent relief.

  • Restriction of relief on AIM-listed shares to 50 per cent.

  • A £1 million cap for trusts.

The Office for Budget Responsibility initially projected that around 2,000 estates would be affected by the BPR/APR reforms [3].

What changed in the 2025 Budget?

The 26 November 2025 Budget confirmed that the BPR and APR reforms announced in 2024 would go ahead from 6 April 2026 [4]. It also introduced two key updates:

The £1m allowance for the 100 per cent rate of BPR and APR will be transferable between spouses and civil partners [4]. This means that if a person does not use their full £1 million relief allowance on death, the unused portion will be transferable.

The freeze on inheritance tax (IHT) thresholds will be maintained for a further year, from April 2030 to April 2031, including the £1m allowance for 100 per cent BPR and APR introduced from April 2026 [5]. This means that the threshold for full relief will not be adjusted for inflation during the freeze, gradually reducing its real value over time.

Updated forecasts: fewer estates affected than first estimated

Revised modelling and policy costings published with the recent Budget show that:

  • The BPR and APR reforms announced in the Autumn 2024 Budget are now forecast to raise £235 million in 2026–27, rising to about £500 million in extra IHT per year from 2027–28 [2].

  • The introduction of spousal transferability is forecast to cost the Exchequer £30 million in 2026–27 and £70 million annually from 2027-28 once fully implemented [2].

  • The number of estates expected to pay more IHT in 2026–27 as a result of the BPR/APR reforms has been revised down from roughly 2,000 to 1,400 estates [2]; that is, the forecast number of affected estates in the first year of the reforms has been revised downward by around 30 per cent.

Take part in FBRF–Cebr research on the impact of the BPR reforms

FBRF and the Centre for Economics and Business Research (Cebr) are undertaking new research to understand the impact of the reforms to BPR on family businesses and the wider economy [6].

They are calling for family businesses to take part in the project. This will involve participating in three confidential one-hour interviews during the period Dec 2025 to May 2026 [6].

👉 Register your interest:
https://cebr.com/blogs/evaluation-of-business-property-relief-reforms-cebr-and-fbrf-research-project/

References

[1] Kemp, M. (2025) Business Property Relief and Family Firms in the UK: From Relief to Reform. Family Business Research Foundation. Available at: https://www.fbrf.org.uk/s/BPR_Relief_to_Re form_Finalv_2025.pdf

[2] HMRC (2025) Agricultural Property Relief and Business Property Relief Changes. Policy Paper. 26 November 2025.
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

[3] Office for Budget Responsibility (OBR) (2025) Supplementary release: Costing of changes to agricultural and business property relief. 22 January. [Online]. Available at: https://obr.uk/docs/dlm_uploads/IHT-APR-and-BPR-supplementary-releaseJan-2025.pdf

[4] HM Treasury (2025a) Budget 2025 (HTML). Available at: https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html

[5] HM Treasury (2025b) Budget 2025: Policy Costings. Available at: https://assets.publishing.service.gov.uk/media/692872fd2a37784b16ecf676/Budget_2025-Policy_Costings.pdf

[6] Cebr (2025) Evaluation of Business Property Relief Reforms: CEBR and FBRF Research Project. Available at: https://cebr.com/blogs/evaluation-of-business-property-relief-reforms-cebr-and-fbrf-research-project/

Martin Kemp https://www.fbrf.org.uk
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