Business Property Relief Calculator (2026 Cap)

How is the business property relief calculator changing this and what will it cost?

From 6 April 2026, Business Property Relief (BPR) and Agricultural Property Relief (APR) are capped. A combined £1 million allowance still gives 100% relief on qualifying business and agricultural property, but anything above that £1 million receives only 50% relief - an effective Inheritance Tax rate of 20% on the excess. So a £4 million trading business that would once have passed entirely free of IHT now faces roughly £600,000 of tax (20% of the £3 million above the cap), payable in instalments. Our business property relief calculator shows exactly where your estate sits against the new £1 million line and what the bill looks like.

This is the biggest change to the taxation of family businesses and farms in a generation. The reform was announced at the Autumn Budget 2024 and takes effect for deaths and chargeable transfers on or after 6 April 2026. Before that date, many qualifying business and agricultural assets passed entirely free of Inheritance Tax; from 2026/27 the relief is rationed.

Key facts at a glance

• Starts: 6 April 2026 (announced Autumn Budget 2024).
• 100% relief: kept on the first £1 million of combined qualifying business and agricultural property.
• 50% relief: applies to value above the £1 million cap - an effective 20% IHT rate on the excess.
• AIM and unquoted shares: qualifying shares get 50% relief and do not share the £1m 100% band.
• Headline IHT rate: 40% on chargeable value; with 50% relief, half is taxable at 40% = 20% effective.
• Plus the usual bands: the £325,000 nil-rate band and £175,000 residence nil-rate band may apply to the wider estate.
• Payment terms: IHT on qualifying business and agricultural property can usually be paid in 10 annual instalments, interest-free.
• Before April 2026: such assets often passed entirely free of Inheritance Tax.

How the business property relief calculator works

The business property relief calculator does one job clearly: it takes the value of your qualifying business and agricultural assets and splits it across the new relief tiers. The first £1 million is treated at 100% relief, so it is removed from the IHT charge entirely. Everything above £1 million is given 50% relief, leaving half of the excess exposed to Inheritance Tax at the standard 40% rate - which works out at 20% of the over-cap amount.

You enter the value of your qualifying assets - a trading company, a partnership share, a working farm, agricultural land and buildings. The calculator applies the combined £1 million allowance at 100%, applies 50% relief to the balance, then taxes the remaining chargeable value at 40%. Because the £1m band is shared across both BPR and APR, the tool does not double-count it: a farmer who also owns a trading business gets one £1 million 100% allowance between them, not one each.

Qualifying AIM and unquoted shares are handled separately. From April 2026 these attract 50% relief and do not draw on the £1 million 100% band, so the BPR calculator treats them as half-relieved from the first pound. Modelling them apart from your main trading or farming assets is the only way to get an accurate figure.

What does the APR BPR cap 2026 mean in pounds?

The table below shows how the APR BPR cap 2026 bites at different asset values. It assumes a single pool of qualifying business or agricultural property, the full £1 million 100% band available, and ignores the separate nil-rate bands so you can see the relief mechanics in isolation. "Taxable" is the chargeable value left after relief; "IHT" is that figure at 40%.

The pattern is consistent: every pound above £1 million produces 20p of tax. That is the single most quotable number from the reform - the marginal Inheritance Tax cost on qualifying business and agricultural property above the cap is a flat 20%, half the headline 40% rate, because 50% of the excess is relieved before tax is charged.

How does the cap interact with the rest of the estate?

The £1 million allowance sits on top of the ordinary Inheritance Tax framework, not instead of it. The standard nil-rate band of £325,000 and the residence nil-rate band of £175,000 can still apply to the wider estate - the family home, savings, investments and other assets that do not qualify for business or agricultural relief. So a farming estate is really two calculations running side by side: the relieved business and agricultural property, and the rest of the estate taxed under the usual rules.

For the non-business side of the estate, model the position with our inheritance tax calculator, which applies the nil-rate bands and the 40% rate to the assets that do not benefit from BPR or APR. If pensions form part of your wealth, note that the rules tighten again from 2027 - our pension inheritance tax 2027 calculator shows how unused pension funds may be drawn into the IHT net. Read the two tools together and you get the full picture of what your beneficiaries will face.

Lifetime planning has knock-on effects too. Gifting shares or land during your lifetime can be a chargeable event for Capital Gains Tax, so check the cost of any disposal with our capital gains tax calculator before you act. And if you are weighing whether to hold a business personally or through a company, the corporation tax calculator and income tax calculator help you see the wider tax cost of each route.

What still qualifies for inheritance tax business relief?

The reform changes the rate of relief above £1 million, not the underlying qualifying conditions. Inheritance tax business relief still depends on the asset being a genuine trading business or interest in one, held for the qualifying period, and not an investment business. Likewise, agricultural property relief continues to require agricultural land and buildings occupied for agricultural purposes under the established ownership and occupation tests.

What has changed is the ceiling. A working farm worth £4 million that once passed entirely free of IHT now has £3 million sitting above the cap at 50% relief - £1.5 million taxable, £600,000 of tax. The qualifying status is unchanged; the cost of passing it on is not. For the official conditions, see GOV.UK guidance on Business Relief and the broader rules at GOV.UK Inheritance Tax.

How to plan for the 2026 cap

The cap is now law for deaths from 6 April 2026, so the planning question is no longer whether it applies but how to manage the bill. Here is a practical, step-by-step approach for business owners and farming families.

• Value your qualifying assets honestly. Run the business property relief calculator with a realistic market value, not a sentimental or out-of-date figure. You cannot plan around a cap until you know how far above £1 million you sit.
• Map the £1 million across both reliefs. If you hold both a trading business and a farm, remember they share one £1 million 100% band - model them together, not separately, so you do not overstate your relief.
• Treat AIM and unquoted shares on their own. They get 50% relief from the first pound and do not use the £1m band, so account for them apart from your main trading or agricultural property.
• Plan the cash for the tax. IHT on qualifying business and agricultural property can usually be paid over 10 annual instalments, interest-free. That can turn a £600,000 bill into ten manageable payments rather than a forced sale of the asset.
• Consider lifetime gifts carefully. Passing assets on during your lifetime may use other reliefs, but can trigger Capital Gains Tax and has its own seven-year rules. Model the CGT first and take advice before transferring anything.
• Review wills and ownership structures. How assets are split between spouses, held in partnership, or routed through trusts affects how much of the £1 million band is used. A structure designed before 2024 may no longer be efficient.
• Take professional advice before acting. The reliefs remain valuable, the rules are detailed, and a rushed restructuring can cost more than the tax it was meant to save.

The headline message is reassuring in one respect and sobering in another. Qualifying business and agricultural property still gets meaningful relief - full relief on the first £1 million and half relief above it - but the era of these assets passing entirely free of Inheritance Tax has ended. Knowing your number now, well ahead of any liquidity event, is what keeps the family business or farm in the family.

Will the £1 million cap change after 2026?

The £1 million allowance and the 50% relief rate above it were set at the Autumn Budget 2024 and take effect from 6 April 2026. As with all tax thresholds, future Budgets could revisit the figures, but for the 2026/27 tax year the cap is fixed and you should plan on its basis. The sensible approach is to establish your position against the £1 million line today, keep your valuations current, and revisit the calculation whenever the value of your business or land moves materially.

Because the effective rate above the cap is a flat 20%, the planning maths is unusually clear: for every additional £1 million of qualifying value over the threshold, expect roughly £200,000 of Inheritance Tax. Use the BPR calculator alongside our wider inheritance tax tools to see the whole estate, then build a funding plan around the interest-free instalment option so the bill never forces a sale.

This article is general information about Business Property Relief and Agricultural Property Relief for the 2026/27 tax year and is not personal tax or financial advice. Reliefs depend on individual circumstances and qualifying conditions; always confirm your position against current GOV.UK guidance or with a qualified adviser before acting.

Who should use this calculator

Business Property Relief can remove qualifying business assets from an Inheritance Tax charge, historically at up to 100%. Announced reforms cap the fully relieved amount, with the excess relieved at a lower rate — a significant change for family businesses and farms.

This shows the taxable value under the capped structure. For owners whose succession planning assumed unlimited relief, the effect can be substantial, and it is the kind of change that needs revisiting well before it is needed rather than after a death.

What this calculator assumes

• Qualifying business property attracts relief up to a cap, with value above it relieved at a reduced rate.
• Tax on the remaining taxable value is charged at the standard 40% IHT rate.
• The assets entered genuinely qualify for the relief.
• Figures reflect announced reforms rather than long-settled law.

Limitations — what it does not cover

• What actually qualifies. Businesses wholly or mainly dealing in securities, land or investments are excluded, and the boundary is often disputed.
• The two-year ownership requirement before relief is available.
• Agricultural Property Relief, which interacts with BPR and has its own rules.
• Excepted assets within a business, such as surplus cash, which do not attract relief.
• Binding sale contracts at death, which can remove relief entirely.
• Planning responses — trusts, lifetime gifts, insurance — which need specialist advice.