Inheritance Tax £1m Business Property Relief Exempt Band

Further details are gradually emerging of the changes concerning Business Property Relief within Inheritance Tax (IHT).

The significant changes to BPR relief with in IHT, which are due to come into effect from 6 April 2026, were announced in the October 2024 budget.

Under these changes, every indivduals estate will have an exempt band of £1m of BPR qualifying assets. The exempt band means that no IHT is payable on the £1m of assets. Any assets qualifying for BPR in excess of the £1m, will be subject to IHT at 20%, rather than the 40% rate which is applied to other assets.

In addition to the BPR exempt band of £1m, each estate has the standard nil rate band of £325,000 plus £175,000 of exempt amounts relating to the dwelling occupied by the deceased . The later relief being dependent upon who the property is left to in the deceased will.

If an estate has unused portions of the standard £325,000 nil rate band or the property £175,000 allowance, the unused portion can be transferred to the surviving spouse. Consquently the surviving spouse could potentially have a nil rate band of £1m (£325,000 * 2 +£175,000 *2).

It has now emerged that any unused portion of the £1m exempt band relating to BPR assets is not transferable to the surviving spouse.