Business Property Relief (BPR) has been the backbone of insurance brokers’ succession planning since it was introduced in 1976 and has meant brokers have been able to claim up to 100% tax relief since the 1990s. However, changes are being introduced from April 2026 that will impact this, and while BPR will remain a valuable relief, businesses and owners now need to plan.
The current rules allow shares in unquoted businesses to qualify for relief from Inheritance Tax (IHT) provided they meet the relevant conditions at the time of disposal. Due to their structure, many brokers currently qualify for relief at 100% – making BPR hugely valuable.
The benefits are further amplified by three other significant benefits:
- No cap on asset value – there’s no limit to the value of assets that can qualify for BPR
- Rebasing on death: When assets are transferred upon death, their value is rebased to the market value at the date of death, which can reduce Capital Gains Tax for beneficiaries on a future disposal.
- Short holding period: Assets only need to be held for two years to qualify for BPR.
Qualifying shares that have been held for two years can be transferred at their market value at the date of death, free of any tax. This relief has meant that, despite the death of an owner, a business could continue trading, without a tax liability that paying might put a burden on the viability of the business.
How is BPR changing from April 2026?
There are three key elements to the changes that have been announced, and these will have a significant impact on brokers looking to sell:
1. BPR will no longer be “uncapped”. The 100% rate will be limited to £1m of combined BPR and Agricultural Property Relief
2. Any BPR amounts exceeding the £1m allowance will qualify for relief at 50%. Assets above the £1m allowance will have an effective IHT rate of 20%
3. Unlike most other IHT allowances, the £1m will not be transferable between spouses. As a result, careful planning will be needed to ensure both spouses’ allowances are used in their lifetime.
These changes will apply to Estates where the death is on or after 6 April 2026. It is important to note that there are anti-forestalling rules that can affect transactions after the date of the Autumn Budget,30 October 2024.
These changes are increasing the IHT burden on many estates with shareholdings in broking businesses and creating substantial liabilities on previously totally exempt shareholdings. To ease the burden, IHT relating to BPR qualifying assets can be paid in interest free instalments over 10 years. But paying this new IHT liability is still likely to be a significant millstone around the necks of the new business owner, so what are the options to help mitigate the impact of these changes?
What can be done to mitigate the impact?
There are tax planning options but these are likely to mean that shareholders in broking businesses will need to take a longer-term view.
- The first consideration should be: What are your needs? Before taking any action, review your assets, finances, and funding requirements going forward. For tax planning to be effective, it usually requires giving away assets and beneficial ownership. Before doing this, you should ensure that it won’t impact your needs going forward
- Review your Will. What are the current implications of the Will as they stand? What simple steps can be taken to reduce the liability ensuring each spouse is using their £1m limit
- A lifetime gift allows for gains to be deferred, and if the donor survives seven years post gift, the tax is deferred until there is a sale, when funds would be available to pay any liability
However, is the family involved in the business and is their participating an active one? If some family members are involved and some aren’t, make sure that you are treating them equally
- Splitting ownership can help reduce the overall IHT exposure. Generally, minority shareholdings in unquoted trading businesses would qualify for substantial discounts on valuation. So, splitting shareholdings and the timing of gifts can be useful to limit the IHT exposure
- Does any planning create a short-term potential exposure to IHT, such as on lifetime gifts if the shareholder fails to survive seven years? Consider how this can be mitigated, for example with insurance.
All of the above require long term thinking. Owners of broking businesses are going to have to start considering IHT earlier than they would have previously, and there is going to be a more complex balancing of the needs of the business, personal finance and the desire to save IHT.
If you would like to discuss these issues, please contact Stephen Kenny.
