By Clare Slattery, Tax Director

The government has announced significant reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR), which will take effect from 6 April 2026. These changes are designed to balance continued support for farms and businesses with the government’s aim of improving public finances and funding public services.

Under the new rules, the 100% inheritance tax relief for qualifying agricultural and business assets will be capped at £2.5 million per individual. Any value above this threshold will qualify for 50% relief, resulting in an effective inheritance tax rate of up to 20%, rather than the standard 40%. This tax can be paid interest free over 10 years, easing cashflow pressures on estates.

Crucially, any unused portion of the £2.5 million allowance can be transferred between spouses or civil partners, mirroring the existing inheritance tax nil-rate band. This means a couple will be able to pass on up to £5 million of qualifying agricultural or business assets at the 100% relief rate. This is in addition to the standard £325,000 nil-rate band per person, meaning substantial estates will continue to benefit from generous reliefs.

The government estimates that these reforms will affect only a small number of estates. In 2026–27, around 185 estates claiming APR (including those also claiming BPR) are expected to pay more inheritance tax. As a result, approximately 85% of estates using APR are forecast to see no increase in inheritance tax liability.

What Is Agricultural Property Relief?

APR is a relief from inheritance tax that applies to qualifying farmland and agricultural property, helping farmers and landowners pass assets to the next generation. BPR operates in a similar way but applies to qualifying business assets.

Practical Impact of the Changes

From April 2026:

• The first £2.5 million of combined agricultural and business property qualifies for 100% relief
• Value above £2.5 million qualifies for 50% relief
• The allowance is transferable between spouses and civil partners
• Existing reliefs, including the £325,000 nil-rate band, continue to apply

For example:

• A married couple or civil partners can pass on up to £5.65 million tax free (£5 million APR/BPR allowance plus £650,000 combined nil-rate bands)
• Two joint owners (such as siblings) can also pass on up to £5.65 million tax free
• A single owner can pass on up to £2.825 million tax free (£2.5 million allowance plus £325,000 nil-rate band)

In some circumstances, estates may be able to pass on even more tax free, depending on how other assets and reliefs apply.

Other Considerations

Transfers between spouses and civil partners remain fully exempt from inheritance tax. Gifts made more than seven years before death will also continue to fall outside the scope of inheritance tax.

Alongside these reforms, the government has committed £11.8 billion over this Parliament to sustainable farming and food production, including expanded funding for Environmental Land Management schemes, rising to £2 billion per year by 2028–29.

For further information or to find out how we can help you and your business please email info@streets.uk.