Entity Setup
Entity Setup Case Study: Using UK’s Enhanced Business Property Relief for Succession Planning
Increasing the Business and Agricultural Property Relief threshold offers new opportunities for estate planning for business owners in the UK.
By NomadicTax Research Team • 5-8 min read • March 23, 2026
## Background: What is Business Property Relief (BPR)?
Business Property Relief is a UK Inheritance Tax (IHT) relief. Qualifying business or agricultural assets can be relieved from 100% or partial inheritance tax if certain conditions are met. Currently, assets over a threshold receive full relief up to certain levels. ([assets.publishing.service.gov.uk](https://assets.publishing.service.gov.uk/media/69a6d7b62e1f4fbda4252208/economic-and-fiscal-outlook-march-2026-web-accessible.pdf?utm_source=openai))
## The New Policy Measure
From **6 April 2026**, the UK will increase the **100% allowance for Agricultural and Business Property Relief** from **£1 million** to **£2.5 million**. This allows more of a business owner’s estate to qualify for full relief before IHT applies. ([assets.publishing.service.gov.uk](https://assets.publishing.service.gov.uk/media/69a6d7b62e1f4fbda4252208/economic-and-fiscal-outlook-march-2026-web-accessible.pdf?utm_source=openai))
## Who This Helps Most
- Owners of family farms or small businesses with property or land exceeding £1 million.
- Succession planning for retiring owners.
- Persons whose equity in business premises is significant.
## Structuring Tips for Entity Setup and Succession
### Choose the right ownership form
Using properly structured **partnerships** or **family companies** holding the business property helps.
### Maintain qualifying activities
To be eligible, assets must be ‘qualifying business property’, used in the business. Passive investments might not qualify. Ensure trading status is maintained.
### Use lifetime transfers or trusts carefully
Transferring business assets into trusts may trigger loss of relief if conditions are breached, especially if trust holds assets for non-qualifying use or delays business activity.
### Estate valuation timing
Because the threshold increases, consider timing transfers and valuation so that the increase applies. Suppose your business premises is valued at £1.8 million; under new rules, up to £2.5 million is eligible, so earlier valuations might be less relevant, but ensuring valuations reflect condition and use at date of death or transfer remains critical.
## Example Scenario
Sarah owns a farm valued at £1.9 million, with business activity employing family. Under old rules, only £1 million would qualify for 100% relief, leaving £900,000 potentially subject to IHT. After 6 April 2026, the full £1.9 million qualifies, saving her beneficiaries significant tax liability.
## Actionable Steps before 2026
- Review business assets and confirm they meet BPR criteria.
- Ensure business trading condition and hours of use are sufficient.
- Update wills, succession plans, trusts to align with the new threshold.
- Consider gifting parts of business property now if other tax efficiencies allow.
## Risks & Caveats
- Active business requirement: assets must contribute to trading. Retirement, redevelopment, or non-business use may disqualify.
- Valuation disputes: higher thresholds may lead HMRC to scrutinize valuations.
- Possible interaction with other reliefs (e.g. Private Residence Relief): plan holistically.
With the increase in the BPR threshold, well-structured entity setup and proactive planning can yield significant inheritance tax savings for many UK business owners and farmers. Being aware now allows proper alignment of ownership, records, and succession documents in advance.