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Agricultural property relief and business property relief are changing from 6 April 2026. For farmers, landowners and family business owners, these are two of the most important inheritance tax reliefs available — and the new rules reduce their scope significantly. If you own agricultural or business property and have not yet reviewed your position in light of these changes, now is the time to act. Our tax advisors at Tax Accountant work with farming families and business owners on inheritance tax planning, and the changes taking effect this April represent one of the most significant shifts in estate planning in a generation.
What Are APR and BPR and Why Do They Matter?
Agricultural property relief (APR) shelters qualifying agricultural property from inheritance tax, either entirely or at a reduced rate. Business property relief (BPR) does the same for qualifying business assets. Depending on the nature of the asset, relief is available at either 100% or 50%. Before 6 April 2026, there is no cap on how much qualifying property can attract the 100% rate. A farm worth £10 million, a family company worth £5 million — all of it can pass free of inheritance tax where the conditions are met. That changes from April 2026.
What Changes From 6 April 2026?
From 6 April 2026, the 100% rate of relief applies only to the first £2.5 million of combined qualifying agricultural and business property. Once that allowance is used up, transfers of property that would otherwise qualify for 100% relief attract relief at 50% instead. The remaining 50% of value becomes chargeable to inheritance tax at 40%, meaning an effective rate of 20% on the excess.
This cap applies across both APR and BPR combined. It is not a separate £2.5 million for each type of relief. A farmer with £2 million of qualifying agricultural property and £1 million of qualifying business assets uses the full £2.5 million allowance across those combined holdings. Any further qualifying property above that level receives only 50% relief.
The government originally announced this change at Autumn Budget 2024, with an initial cap of just £1 million. Following significant opposition — including widespread protests by farming communities who dubbed it the “farm tax” — the allowance was raised first by allowing transferability between spouses, and then in late December 2025 by increasing the cap itself from £1 million to £2.5 million. The government also introduced a ten-year interest-free instalment option for IHT arising from the loss of 100% relief, which provides some cashflow relief for asset-rich estates.
Who Does This Actually Affect?
Despite being widely known as the “farm tax,” these changes affect far more than farmers. Any family business owner whose company qualifies for BPR needs to review their position. The £2.5 million allowance sounds generous, but many family companies — particularly those that have grown over decades — hold business assets well in excess of that figure. The relief that previously sheltered the entire business from IHT now only covers the first £2.5 million at 100%.
For farming families, the issue is compounded by the nature of agricultural assets. Farms are typically asset-rich and cash-poor. A working farm with land, buildings and farmhouses can easily exceed £2.5 million in agricultural value, but generate modest annual income relative to that capital value. Paying IHT at 20% on the excess — even in instalments — may require the sale of land or assets that have been in a family for generations. HMRC’s guidance on agricultural property relief and business relief sets out the qualifying conditions in full.
What Property Qualifies for APR?
APR applies to agricultural property that forms part of a working farm in the UK. It can be owner-occupied or let. Qualifying property includes growing crops, stud farms for breeding and rearing horses, grazing land, short rotation coppice, land under the Habitat Scheme or a crop rotation scheme, milk quotas associated with the land, some agricultural shares and securities, farm buildings, farm cottages and farmhouses.
Farmhouses and cottages must be of a size appropriate to the farming activity and are valued as if they could only be used for agricultural purposes. Any excess over agricultural value does not qualify for APR. Farm equipment and machinery, derelict buildings, harvested crops, livestock and property subject to a binding contract for sale do not qualify.
Before the transfer, the land must have been owned and occupied for agricultural purposes for two years where the owner, a company they control, or their spouse or civil partner occupies it. Where someone else occupies the land — such as a tenant — the ownership period extends to seven years. The 100% rate applies where the owner farmed the land themselves, where land was used under a short-term grazing licence, or where it was let on a tenancy beginning on or after 1 September 1995. All other cases attract the 50% rate.
What Property Qualifies for BPR?
BPR reduces the value of a business asset for IHT purposes by 100% or 50%. The 100% rate applies to a transfer of a business or shares in an unlisted company. The 50% rate applies to shares controlling more than 50% of the voting rights in a listed company, land, buildings or machinery owned by the deceased and used in a business in which they were a partner or controller, and land, buildings or machinery used in a business held in a trust that the business transferor had the right to benefit from.
BPR requires the deceased to have owned the business or asset for at least two years before death. It is not available where the company mainly deals with securities, stocks or shares, land or buildings, or makes or holds investments. It also does not apply to not-for-profit organisations, companies being sold unless the proceeds are mainly shares in the acquiring company, or companies being wound up unless the winding up is part of a process to allow the business to continue. Double relief — claiming both APR and BPR on the same asset — is not available.
The Interaction With the Nil Rate Band and RNRB
The £2.5 million allowance sits alongside — not instead of — the nil rate band (£325,000) and the residence nil rate band (RNRB) of up to £175,000. However, the RNRB tapers away by £1 for every £2 by which the net estate exceeds £2 million, disappearing entirely where the estate reaches £2.35 million or above. Where a client uses their full £2.5 million APR or BPR allowance, the estate will almost certainly exceed £2 million and the RNRB will not be available.
In practice, a couple can leave up to £5.65 million free of IHT — two nil rate bands of £325,000 each plus two £2.5 million APR or BPR allowances. With careful planning, it is possible to reach £5.825 million free of IHT, but this requires specific structuring around the first death, the surviving partner’s estate value and the inclusion of a qualifying main residence passing to a direct descendant.
Transferability of the Unused Allowance
Any unused portion of the £2.5 million allowance transfers to the surviving spouse or civil partner’s estate — mirroring the way the nil rate band works. Where the first death occurred before 6 April 2026, the full £2.5 million is available for transfer to the survivor regardless of the value of the deceased’s transfers that attracted APR or BPR at 100% during their lifetime. Trusts can also benefit from the £2.5 million allowance.
AIM Shares and the BPR Rate Change
From 6 April 2026, the rate of BPR on shares admitted to a recognised stock exchange and designated as “not listed” — commonly AIM shares — reduces from 100% to 50%. This is a separate change from the £2.5 million cap and applies regardless of the overall value of BPR qualifying assets in the estate. Investors who hold AIM shares as part of an IHT planning strategy need to review those arrangements now.
What Should You Do Before and After April 2026?
Anyone who changed their will when the original £1 million cap was announced should revisit it now. The increase to £2.5 million and the introduction of transferability may change the optimal structuring significantly. Wills drafted around the £1 million figure may no longer reflect the most tax-efficient approach for the estate.
More broadly, anyone with qualifying agricultural or business property above £2.5 million needs to consider how the excess will be funded. Options include life assurance written in trust to cover the expected IHT liability, gifting strategies within the seven-year window, restructuring business interests before the transfer, or using the ten-year instalment facility for the IHT that arises. The ICAEW has published useful commentary on the impact of APR and BPR changes on family businesses and farms for those wanting a broader professional perspective.
How Our Tax Advisors Can Help
These changes require careful, personalised planning — not generic advice. Our tax advisors work with farming families, family business owners and their solicitors to review existing wills, model the IHT exposure under the new rules, and identify the most effective planning strategies before and after April 2026. We do this through our inheritance tax service and our tax planning and advisory work.
If you own qualifying agricultural or business property and have not yet reviewed your estate plan in light of these changes, get in touch with our team. The window to act before April 2026 is closing. We are here to help you understand your position and make the right decisions while the options are still open.