Briefing: Tax, a new landscape, Agricultural Property Relief and Business Property Relief

Yvonne Evans explores the new rules on Agricultural and Business Property Relief which take effect for deaths on or after 6 April 2026.

Farmers fought formidably against the reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) for Inheritance Tax, first announced by Rachel Reeves in the October 2024 Budget. The initial announcement was that 100% APR and BPR would apply only on the first £1 million of qualifying property, and the relief would be reduced to 50% thereafter. Several significant concessions have been made since then, substantially reducing the impact on farmers and business owners. The new rules on Agricultural and Business Property Relief take effect for deaths on or after 6 April 2026.

Evolution of the reform

Transferability of the 100% Relief Allowance

In the November 2025 Budget, it was announced that the (then £1 million) allowance for full relief would be transferable between spouses and civil partners, including retrospective transferability from a spouse or partner who had died before April 2026. 

Increase of the 100% Relief Threshold

More surprisingly, on 23 December 2025, it was announced that the allowance for 100% relief would increase from £1 million to £2.5 million.

The combination of transferability and the increased threshold dramatically boosts the tax-free potential for couples. Spouses or civil partners may now pass up to £5 million of qualifying agricultural or business assets between them without incurring IHT on those assets, in addition to existing nil rate bands and other allowances. It is estimated the revision will halve the estimated number of agricultural estates affected across the UK (down to 185 in 2026–27), reduce affected business estates by a third, and raise £100m a year less than the original plans.

Planning Measures

Before the policy shifts were announced, many taxpayers undertook extensive planning, typically restructuring ownership between spouses to optimise relief entitlement, or transferring assets into trusts to utilise the allowance without immediate IHT charges. For larger estates with significant agricultural or business assets, this anticipatory early action may still be beneficial.

Judicial Review

An English judicial review challenge was fast-tracked and heard at the High Court on 17 and 18 March 2026, based on failure to comply with the Tax Consultation Framework and the “legitimate expectation” that farmers and business owners would be consulted. The outcome is awaited.

Mechanics of the Reliefs from 6 April 2026

Under the new rules, APR and BPR will continue to provide 100% relief, but only up to £2.5 million per individual (or £5 million for spouses or civil partners). Beyond this:

The default relief rate becomes 50%, meaning that half of the value not relieved is taxed at 40%. This produces an effective tax rate of 20% on qualifying assets above the allowance.

A new section 124D of the Inheritance Tax Act 1984 creates the allowance.

• Each individual starts with a £2.5 million allowance.
• The allowance applies to the total of agricultural and business property and must be allocated proportionately across each class of qualifying property.
• It is reduced by previous chargeable transfers made within the prior seven years.
• Potentially exempt transfers only reduce the allowance if they become chargeable on death.

·       All the revised rules will apply for lifetime transfers on or after 30 October 2024 if the donor dies on or after 6 April 2026.

In effect, the system introduces a second seven‑year clock alongside the existing nil rate band clock. The provisions also now include a separate £2.5 million allowance for trusts.

It is important to remember that in relation to lifetime transfers for IHT, the recipient spouse/civil partner must qualify under the rules on period of ownership, and they will only inherit their partner’s period of ownership on a transfer on death. For large estates, the incentives to make lifetime transfers must be balanced against the value of the CGT tax-free uplift on death. Consider also the effect of transfers on residential nil rate band, which starts to decrease when estates exceed £2 million.

Alternative Investment Market (AIM) Investments

Shares listed on the AIM now qualify only for 50% relief with no access to the £2.5 million allowance. Importantly, they remain outside the main APR/BPR relief and do not erode that allowance for other assets.

Claiming APR and BPR on estates

Capping full relief at £2.5 million will lead to closer scrutiny by HMRC of the valuation of estates over (or not far below) the £2.5 million mark, whether the qualifying property is land or shares. Previously HMRC would not be too concerned about the precise value when 100% relief was available on qualifying property, because there was no IHT at stake. For shares in particular, the rules on discounts for different levels of holding becomes important. Complete and accurate valuation of land and shares will be crucial, at the time when lifetime transfers are made, and when claiming the relief for estates.