Three months into the reformed Business Property Relief regime, HMRC figures show one change is behind most of the extra inheritance tax bills. AIM and other “not listed” shares lost 100% relief entirely from 6 April 2026, and none of the new £2.5 million allowance applies to them, HMRC says.
Key figures published by HMRC and HM Treasury:
- 100% relief is now capped at £2.5 million combined agricultural and business property per person, up from the £1 million level proposed at Autumn Budget 2024.
- Value above the allowance receives 50% relief, an effective inheritance tax rate of up to 20%.
- The allowance transfers between spouses and civil partners, including retrospectively where the first death was before 6 April 2026.
- Shares on AIM and other “not listed” recognised stock exchanges receive 50% relief in all cases, with none of the £2.5 million allowance available to them.
- Around 700 of the up to 1,100 estates forecast to pay more inheritance tax in 2026 to 2027 hold only “not listed” shares.
Why the Business Property Relief allowance rose to £2.5 million
The government first announced the change at Autumn Budget 2024 on 30 October 2024, proposing to cap 100% relief at £1 million of combined agricultural and business property. Farming and business groups pushed back immediately.
The Environment, Food and Rural Affairs Select Committee recommended the government delay the change.
The National Farmers’ Union ran a sustained campaign against the reforms, and the Country Land and Business Association argued they could affect around 70,000 farms, according to the House of Commons Library.
At Budget 2025, the government made the £1 million allowance transferable between spouses and civil partners. Then, on 23 December 2025, it increased the allowance itself, from £1 million to £2.5 million.
MPs voted 327 to 182 on 2 December 2025 to allow the reforms to proceed, parliamentary records show.
The House of Commons agreed government amendments raising the allowance during committee debate on the Finance Bill on 12 January 2026.
The measure became law under the Finance Act 2026 and took effect on 6 April 2026, as scheduled. Its exchequer impact is forecast to rise from £140 million in 2026 to 2027 to £295 million a year by 2029 to 2030, according to OBR-certified figures in HMRC’s technical policy paper.
What the £2.5 million allowance covers
From 6 April 2026, the first £2.5 million of combined agricultural and business property in an estate qualifies for 100% relief.
Anything above that is relieved at 50%, producing an effective inheritance tax rate of up to 20% instead of the standard 40%, according to GOV.UK.
Any unused allowance transfers to a surviving spouse or civil partner, including where the first death happened before 6 April 2026. In a worked example published by GOV.UK, a married couple can pass on up to £5.65 million tax-free between them once nil-rate bands are included.
Trusts holding agricultural or business property have their own separate £2.5 million allowance, which refreshes at each 10-year trust anniversary. Individuals’ allowances refresh every seven years on lifetime transfers, according to professional advisers and HMRC’s technical consultation documents.
Tax on assets above the allowance can also be paid in equal instalments over 10 years, interest-free — an option now extended to all qualifying agricultural and business property.
Why ‘not listed’ shares are driving most of the tax
Shares on AIM and other recognised stock exchanges designated “not listed” lost their 100% relief entirely from 6 April 2026.
They now receive 50% relief in all circumstances, and none of the £2.5 million allowance applies to them, according to HMRC’s technical policy paper on the reforms.
This single change accounts for most of the extra tax the reforms are expected to raise. Of the up to 1,100 estates HMRC expects to pay more inheritance tax in 2026 to 2027, up to 915 are estates claiming only Business Property Relief, HMRC figures show. Around 700 of those hold only “not listed” shares.
By contrast, most other estates are unaffected. Around 85% of estates claiming Agricultural Property Relief are forecast to see no change.
More than 80% of Business Property Relief claimants whose shares are conventionally listed are also forecast to pay no more tax, according to HMRC’s impact assessment.
The reforms are also concentrated among older estates. In the most recent data, 83% of Agricultural Property Relief claims and 76% of Business Property Relief claims came from estates of people aged 75 or over, and around half involved a widow or widower.
What this means for business owners
If you hold agricultural or business assets, particularly shares that are not listed on a recognised stock exchange’s main market, it is worth reviewing your position now that the rules have bedded in.
- Check how your assets are actually classified. Shares on AIM or other markets designated “not listed” now receive 50% relief regardless of value, so they do not benefit from the £2.5 million allowance at all.
- Review wills that split assets between a spouse and other beneficiaries. Standard clauses written before April 2026 may not use the new allowance efficiently and could need updating.
- Model the effective 20% rate on value above the allowance. Consider the 10-year interest-free instalment option if a tax bill would be hard to fund without selling the business or farm.
- Take advice before restructuring. Lifetime gifting, trust planning and share structures all interact differently with the new rules, and errors can be costly given the sums involved.
Because the rules affect wills, trusts and share structures differently, it is worth getting professional advice early, tailored to the specific assets involved.
Key Takeaways
- The 100% relief allowance for combined agricultural and business property rose to £2.5 million per person on 23 December 2025, up from a proposed £1 million.
- Above the allowance, relief drops to 50%, an effective 20% inheritance tax rate instead of 40%.
- AIM and other “not listed” shares get 50% relief in all cases and do not benefit from the allowance at all — the change driving most of the extra tax.
- Around 700 of the up to 1,100 estates expected to pay more tax hold only this type of share, according to HMRC.
- The allowance transfers between spouses, including retrospectively, and unpaid tax can be spread over 10 interest-free instalments.
Written by:
Tax Rebate Services Editorial Team
Reviewed by:
Tony Shanks
,
qualified Taxation Technician (ATT)
Last updated:
This article provides general information and is correct as at the date shown. It isn't personalised tax advice — for help with your own circumstances, speak to a qualified adviser or HMRC.
