July 15, 2026
Article
The legislation changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), effective from 6 April 2026, are one of the most significant inheritance tax (IHT) changes for business owners and farming families in recent years. Historically, these reliefs could provide up to 100% relief on qualifying business and agricultural assets with no overall cap, allowing many family businesses and farms to pass between generations free of IHT.
That changed following the Autumn Budget 2024, when the Government proposed capping 100% APR and BPR at £1 million per person, with only 50% relief above that level. The proposal caused widespread concern, because it could have created substantial IHT liabilities without providing an obvious source of funds to pay for them.
Following consultation and strong industry lobbying, the final rules were softened. Everyone now has a £2.5 million allowance that can still qualify for 100% APR and BPR, with qualifying assets above that level receiving 50% relief. Importantly, the allowance is transferable between spouses and civil partners, meaning a couple may be able to pass up to £5 million of qualifying assets free of IHT, before taking standard nil-rate bands into account.
Even so, the principle has changed fundamentally as relief is no longer unlimited. Larger estates, diversified farming operations and family-owned trading businesses may now face an IHT exposure where previously there was little or none. This is especially relevant where land or business values have risen significantly, pushing total asset values above the new thresholds.
The reforms also affect certain investments, for example, shares quoted on markets such as AIM. These previously qualified for 100% BPR but will now generally receive only 50% relief. This reduces the effectiveness of some inheritance tax planning arrangements and makes it more important for clients and advisers to review how investment portfolios fit into wider estate planning.
Lifetime gifting can remain a useful strategy for removing value from an estate, subject to the seven-year survival rule, but care is needed because anti-forestalling provisions may affect gifts made around the reform period. Timing and structure matter more than ever, and seeking advice is highly recommended.
With a defined allowance now in place, it is vital that both spouses or civil partners can make full use of their available relief. This may require changes to wills, succession planning and the way business or agricultural assets are held.
In addition to structural changes, many families are now considering insurance-based solutions, such as whole of-life policies written in trust, to provide funds without forcing the sale of core assets. Whilst this does not mitigate the IHT, it can be viewed as a simple solution to paying the tax at the right time.
Overall, APR and BPR remain valuable reliefs, but the April 2026 reforms introduce a more restricted framework and greater planning complexity. For affected families, early review of gifting, ownership and protection arrangements will be essential to ensure the wider family goals are met.
If you would like to discuss these changes and the impact on your personal situation, please get in touch.
Please note that this article is for information only and does not constitute advice. The Financial Conduct Authority does not regulate estate planning, tax advice, wills or trusts.