From 6 April 2026 a £2.5m allowance caps 100% Business and Agricultural Property Relief. Neither relief exists in US law — what transatlantic owners and beneficiaries must check on both sides.
Business Property Relief (BPR) and Agricultural Property Relief (APR) can take qualifying UK trading and farming assets out of inheritance tax, but from 6 April 2026 relief at 100% is capped by a £2.5 million allowance per person, with 50% relief above it. Neither relief exists in US law: a US citizen or green card holder who owns the business — or inherits it — is still measured against US rules that reach worldwide assets and carry their own reporting. The structures that minimise UK inheritance tax and those that keep a US person's position clean are not the same structures, and that is the real problem for transatlantic families.
Rates, allowances and rules as at 4 October 2026. The UK Budget is on 28 October 2026 and could change any of the UK figures below.
The UK charges inheritance tax at 40% above the available threshold, with a nil-rate band of £325,000. BPR and APR work before that calculation: they reduce the value transferred rather than crediting against the tax.
Business Relief applies to a business or an interest in a business, and to shares in an unlisted company. It applies at the lower rate to land, buildings or machinery owned personally but used in a business the deceased controlled or was a partner in, and to controlling shareholdings in listed companies.
Agricultural Relief applies to the agricultural value of agricultural property: land or pasture used to grow crops or rear animals, stud farms, short-rotation coppice, land in environmental agreements, and farm buildings, cottages and farmhouses proportionate to the farming activity. Farm equipment, livestock, harvested crops and derelict buildings are not agricultural property — though equipment and livestock may qualify for Business Relief if the farm is a business.
For Business Relief, the deceased must have owned the business or asset for at least two years before death. Agricultural Relief has two clocks: two years where the property was owned and occupied for agricultural purposes by the owner, a company they controlled, or their spouse or civil partner, and seven years where occupied by someone else, such as a tenant. Deathbed reorganisation rarely works, because restructuring resets clocks.
Business Relief is denied where the business consists wholly or mainly of dealing in securities, stocks or shares, dealing in land or buildings, or making or holding investments — the test in section 105(3) of the Inheritance Tax Act 1984, applied to the business as a whole. That is why a substantial, professionally run property letting portfolio normally gets nothing while a smaller trading company gets full relief: scale and commerciality are not the test. Relief is also unavailable to a not-for-profit organisation, or a business being sold or wound up.
Individual assets can also be stripped out of a qualifying business. An asset does not qualify if it was not used mainly for the business in the two years before the transfer, or is not needed for future use in the business. This is where surplus cash sits: a company holding an investment portfolio or a cash balance far beyond its working needs will usually find that balance treated as an excepted asset, even though the trade qualifies.
Schedule 12 to the Finance Act 2026 restructured both reliefs. The mechanism matters, because it is not a simple cap: the legislation sets 50% as the baseline rate, then grants a 100% relief allowance on top.
Budget 2024 announced that 100% relief would continue for the first £1 million of combined agricultural and business property, with 50% thereafter. On 23 December 2025 the government announced the threshold would rise from £1m to £2.5m when introduced in April 2026, and the change went into the Finance Bill in January.
The figure now in force is therefore a £2.5 million allowance on the combined value of property qualifying for 100% business or agricultural property relief, for transfers made and chargeable occasions arising on or after 6 April 2026. Where qualifying property exceeds it, the excess gets 50% relief, and the allowance is applied proportionately across the qualifying property.
Two points matter if you have already acted. The allowance is reduced by amounts used in chargeable transfers in the seven years before the current transfer, so lifetime giving consumes it. And transitional rules can bring transfers made on or after 30 October 2024 into the new regime where the transferor dies on or after 6 April 2026 — gifts made between announcement and start date are not automatically outside the reform.
Any unused allowance can be transferred to a surviving spouse or civil partner from 6 April 2026, on a claim made within four years of the survivor's death or six months of the personal representatives starting their role. Where the first death was before 6 April 2026, gov.uk states the entire £2.5 million allowance is assumed available for transfer — so widows and widowers are not penalised for a death predating the rules. Combining two allowances with two nil-rate bands, gov.uk's own illustration is a farm worth up to £5.65 million passing free of inheritance tax.
From 6 April 2026 business property relief falls from 100% to 50% in all circumstances for shares admitted to trading on recognised stock exchanges designated as "not listed" — AIM being the obvious example. Because 50% applies regardless, the 100% allowance does not improve their position. That matters to anyone who built an AIM portfolio specifically for inheritance tax, and is doubly awkward for US persons, for whom AIM-quoted investment vehicles can raise passive foreign investment company questions.
A £2.5 million allowance also applies to relievable agricultural and business property in trusts. HMRC's manual indicates pre-commencement settlements, special trusts and 18-to-25 trusts each receive a £2.5 million allowance, while for relevant property settlements the allowance arises by reference to the settlor's qualifying transfers and is capped at £2.5 million across all of that settlor's settlements. For existing trusts it bites from the next ten-year anniversary on or after 6 April 2026 — giving some trustees a window and others almost none.
From 6 April 2026 the option to pay inheritance tax by equal annual instalments over 10 years, interest-free, is extended to all property eligible for agricultural or business property relief. Where the family's wealth is the farm or the company rather than cash, that is the difference between a forced sale and a funding plan.
A sole shareholder of an unlisted UK trading company dies after 6 April 2026. The shares are worth £6,000,000, the two-year test is met, the full allowance is available with none transferred, and the shares pass to the children. Ignore other assets and the residence nil-rate band.
| Step | Amount |
|---|---|
| Qualifying unlisted trading shares | £6,000,000 |
| Covered by the 100% relief allowance | £2,500,000 → relieved in full |
| Balance attracting 50% relief | £3,500,000 → £1,750,000 chargeable |
| Less nil-rate band | (£325,000) |
| Taxable | £1,425,000 |
| Inheritance tax at 40% | £570,000 |
| Over 10 equal interest-free instalments | £57,000 a year |
Under the pre-2026 rules the same shares would have been fully relieved. With a spouse's unused allowance too, the first £5,000,000 would have been covered.
Now the second layer. If that shareholder was also a US citizen, the shares sit in the US gross estate at their dollar value on the date of death. Against a 2026 basic exclusion amount of $15,000,000 there may well be no US estate tax — but the valuation still has to be done, a US return may still be required, and whether the UK tax reduces any US tax is governed by the estate and gift tax treaty and the US credit rules. It is computed, not assumed.
For a US citizen or US domiciliary the gross estate includes worldwide property — cash and securities, real estate, insurance, trusts, annuities and business interests. There is no situs filter and no equivalent of BPR or APR. A filing is required where the gross estate, increased by adjusted taxable gifts and specific gift tax exemption, exceeds the filing threshold for the year of death; the basic exclusion amount is $15,000,000 for 2026 (following Public Law 119-21, enacted 4 July 2025), against $13,990,000 for 2025.
A US citizen in the UK long enough sits inside both systems at once. The UK's reach over non-UK assets now turns on the long-term UK residence test — broadly, UK residence in at least 10 of the previous 20 tax years — covered in UK inheritance tax and long-term residence for US citizens. The US reach turns simply on citizenship; see US estate and gift tax for Americans in the UK.
For a US beneficiary the number that matters most over a lifetime is often not the estate tax but the basis. The basis of property acquired from a decedent is generally its fair market value at the date of death, so a US child who inherits shares and later sells is taxed on the gain from that value, not from what a grandparent paid. An alternate valuation date can be used only where an estate tax return is filed and the election made on it, and where a Schedule A to Form 8971 is received from an executor the recipient may have to report a basis consistent with the estate tax value.
The interaction with UK planning is direct: structures that keep value out of a taxable estate for UK purposes can also keep it out of the events that reset basis for a US beneficiary — trading a 40% UK charge today for a US capital gains charge on decades of growth later. Which is better is arithmetic, not a slogan.
The US and the UK have both an income tax treaty and a separate estate and gift tax treaty; the IRS lists the United Kingdom among the countries with an estate and gift treaty, distinct from the income tax treaty list. A tie-breaker or relief article relied on for income tax tells you nothing about where you are domiciled for estate tax purposes. The two analyses run under different instruments and can reach different answers about the same person.
The UK gives an unlimited exemption for transfers to a spouse or civil partner. The US does not match it where the surviving spouse is not a US citizen: the unlimited marital deduction is generally unavailable, and is instead allowed where the property passes to a qualified domestic trust (QDOT), or is irrevocably assigned to one before the estate tax return is filed. Estate tax is then imposed as distributions are made from that trust. A will leaving everything to a British spouse is perfect UK planning and potentially expensive US planning.
A UK plan that spreads shares to use everyone's allowance can, in the same stroke, create a CFC and several new annual US filings.
| Asset | UK relief from 6 April 2026 | US exposure to check |
|---|---|---|
| Unlisted shares in a UK trading company | 100% within the £2.5m allowance; 50% above | Worldwide estate inclusion; Form 5471 and CFC status; basis at death; Form 3520 for a US beneficiary |
| Sole trade or partnership interest in a trading business | 100% within the allowance; 50% above | Estate inclusion; reporting for a foreign business or partnership interest; current-year income |
| Shares "not listed" on a recognised exchange (e.g. AIM) | 50% in all circumstances — the allowance does not help | PFIC analysis for funds and investment vehicles; annual reporting; estate inclusion |
| Owner-occupied farmland and qualifying buildings | APR 100% within the allowance (2-year test); 50% above | Estate inclusion; basis at death; agricultural versus development value |
| Let farmland (tenancy from 1 September 1995) | APR 100% within the allowance, subject to the 7-year occupation test | Estate inclusion; rental income; foreign tax credit position |
| Land, buildings or machinery owned personally, used in the business | 50% | Estate inclusion; depreciation and basis history |
| Property letting or investment business | Normally no relief — "wholly or mainly investment" | Estate inclusion; CFC and Form 5471 if held through a company |
| Surplus cash or investments inside a trading company | Normally excluded as excepted assets | Passive income inclusions; PFIC risk inside the structure |
| Qualifying property in an existing trust | £2.5m trust allowance, from the next ten-year anniversary on or after 6 April 2026 | Foreign trust reporting; grantor status; distributions |
Family investment companies deserve caution here: a company whose business is making or holding investments is precisely what section 105(3) excludes from Business Relief, and a US shareholder faces the full foreign-corporation regime. See family investment companies and US persons.
1. Fix the facts. Who is a US person, and who is long-term UK resident? Nothing can be designed until this is written down.
2. Test trading status honestly. Apply the "wholly or mainly investment" test to the business as a whole, and identify excepted assets — particularly surplus cash.
3. Value the estate on both sides. A UK inheritance tax computation and a US gross estate figure for the same date. They will differ, and the gap is the planning problem.
4. Check the wills and the spouse position, specifically whether a QDOT is needed for the US marital deduction.
5. Model the basis consequences for each candidate structure, and the gain on a realistic future sale.
6. Count the new filings before you restructure. Price the compliance, not just the tax.
7. Then restructure — with both sides signing off on the same document.
Read this as a warning, not a footnote. Transatlantic succession planning is one of the few areas where a competent, correct, single-country plan can do real damage. A UK-only adviser can build a structure that is flawless for inheritance tax and creates years of US exposure and reporting; a US-only adviser can do the reverse. Nothing should be gifted, settled, reorganised or rewritten until a licensed professional on each side has reviewed the same proposal and agreed it.
If the business, farm or portfolio is worth meaningfully more than £2.5 million, or any owner or likely beneficiary is a US citizen or green card holder, this is not a research project. It needs a UK computation and a US computation of the same estate, side by side, before any document is signed. At Next Tax Source an ACCA-qualified accountant handles the UK position and a licensed CPA or Enrolled Agent handles the US position; every filing is reviewed and signed off by the licensed professional responsible for it. Our tax specialists for US and UK families can scope the two-sided review, or you can book a consultation and bring the structure you already have.
This is general information about the rules in force at the date shown, not advice on your circumstances. The UK Budget on 28 October 2026 may change the UK figures.