Inheritance Tax (IHT) is about to change in a big way. As of 6 April 2026, new rules will reshape how farms, estates, and rural businesses pass from one generation to the next. The reforms target Agricultural Property Relief (APR) and Business Property Relief (BPR), two crucial reliefs that have long helped to reduce, or even eliminate, the IHT burden on agricultural and business assets.
Whilst these reforms may feel unsettling, it’s important to remember that they can be managed with the right approach. With careful planning and timely advice, most families can still protect the long-term future of their farms and businesses. The key is to review your position now so that any steps taken are proactive, not reactive.
What’s Changing?
A new upper limit for full relief
From April 2026, each individual will have a maximum £2.5 million allowance for the value of assets that can benefit from 100% Agricultural Property Relief (APR) or 100% Business Property Relief (BPR).
If the total value of qualifying assets exceeds this figure, the surplus will only receive 50% relief (effectively reducing the IHT rate from 40% to 20%) meaning part of it may become subject to tax.
For married couples or civil partners, any unused portion of the allowance can be passed to the surviving partner, creating the potential to shelter up to £5.65 million of qualifying property once combined with the standard IHT nil-rate bands.
This marks a clear departure from the government’s initial proposal in the Autumn Budget 2024, which would have imposed a £1 million cap on APR/BPR with no ability to transfer any unused allowance between spouses or civil partners. The decision to increase the cap to £2.5 million may soften the impact, but strong objections from farming and rural communities remain regarding the way agricultural and business assets will be treated for IHT purposes.
Reduced relief for certain types of shares
Some business owners hold shares in companies that trade on markets not recognised as official stock exchanges — including AIM. Under the new rules, such shares will only receive 50% BPR, whereas historically they often qualified for full relief after ownership of two years.
More flexible payment options for IHT
Where tax does become due, families will have the option to pay it in 10 equal interest free instalments if it relates to assets that qualify for APR or BPR. This is designed to help preserve cashflow where major assets, such as farmland, cannot easily be sold.
Trusts brought under the same allowance
Trusts that own agricultural or business assets will also fall under the £2.5 million cap, with any excess qualifying only for 50% of the relief. The way IHT exit charges are calculated for trusts will also be standardised, so they are always based on the value before relief, creating a more consistent approach.
Why This Matters for Farming Families
The introduction of a cap on relief fundamentally alters the landscape for succession planning. Farms and rural businesses that previously fell comfortably within the scope of full APR/BPR may now find parts of their estate subject to tax under the new thresholds. This shift away from unlimited relief marks a significant policy change, underlining the need to revisit existing arrangements.
What Should You Do Now?
- Update valuations: land and business values vary widely — an up to date valuation is essential for effective planning and will show whether you’re likely to exceed the new allowance.
- Check eligibility: some assets that once qualified for 100% relief may now attract only 50%, depending on how they are used or structured.
- Review wills and succession plans: couples may benefit from restructuring ownership to make the most of transferable allowances.
- Look at lifetime gifting: assess whether lifetime gifting can help with long term inheritance tax mitigation.
Final Thought
The future may be unpredictable, but timely planning can make all the difference. By taking advice early, you give yourself the widest range of options and the strongest position to shape the outcome for your family and your business.
For further information, please do not hesitate to contact Lauren Hancock (Accredited Member of the Association of Lifetime Lawyers), Chloe Baldwin (Rural Affairs) or Lewis Barber (Rural Affairs).