If you own a farm, agricultural land, or a family business, recent changes to inheritance tax (IHT) reliefs are worth understanding.
From 6 April 2026, the 100% rate of Agricultural Property Relief (APR) and Business Property Relief (BPR) will only apply to the first £2.5 million of qualifying assets.
Anything above that may only qualify for 50% relief, which could increase the inheritance tax due when assets are passed on.
For many business owners and farming families, this makes estate planning more important than ever.
Let’s look at what these reliefs are and how the new allowance works.
What Is Agricultural Property Relief (APR)?
Agricultural Property Relief (APR) helps reduce the inheritance tax payable when agricultural property is passed on during your lifetime or after death.
In many cases, the relief can reduce the taxable value of qualifying assets by 100%, meaning no inheritance tax is due on those assets.
Examples of property that may qualify include:
- Agricultural land and growing crops
- Stud farms used for breeding or grazing horses
- Farm buildings, farm cottages and farmhouses
- Short rotation coppice
- Land used in crop rotation schemes
- Milk quotas linked to the land
- Some agricultural shares and securities
However, some assets do not qualify for APR, including:
- Farm machinery and equipment
- Livestock
- Harvested crops
- Derelict buildings
- Property under a binding contract for sale
APR is only available where the property is part of a working farm in the UK.
To qualify, the land must usually have been owned and used for agricultural purposes for:
- At least two years if occupied by the owner, their company, or their spouse or civil partner
- At least seven years if the land is farmed by someone else (for example, a tenant)
What Is Business Property Relief (BPR)?
Business Property Relief (BPR) helps reduce inheritance tax on certain business assets.
Depending on the type of asset, relief may be available at 100% or 50%.
Relief at 100% is typically available for:
- A business or interest in a business
- Shares in an unlisted company
Relief at 50% may apply to:
- Shares controlling more than 50% of the voting rights in a listed company
- Land, buildings or machinery owned personally but used in a business you control or are a partner in
- Land, buildings or machinery used by a business but held in a trust
To qualify, the business or asset usually needs to have been owned for at least two years before the transfer or death.
Certain types of companies do not qualify, particularly those mainly involved in dealing with stocks, shares, land or buildings.
How the £2.5m Allowance Works
From 6 April 2026, the 100% relief for APR and BPR will be limited to the first £2.5 million of qualifying property.
Once this allowance has been used, any additional qualifying assets will usually only receive 50% relief.
The allowance sits alongside other inheritance tax allowances, including:
- The Nil Rate Band (NRB)
- The Residence Nil Rate Band (RNRB)
However, there is an important interaction to be aware of.
The Residence Nil Rate Band begins to reduce once an estate exceeds £2 million and disappears entirely when the estate reaches £2.35 million.
This means that if your estate uses the full £2.5 million APR/BPR allowance, you may not also benefit from the residence nil rate band.
Can the Allowance Be Transferred Between Spouses?
Yes.
Just like the Nil Rate Band and Residence Nil Rate Band, any unused APR/BPR allowance can potentially be transferred to a surviving spouse or civil partner.
This means couples may be able to combine allowances as part of their estate planning.
Why Estate Planning Matters More Than Ever
These changes highlight why it’s important to review your estate and succession plans regularly, especially if you own:
- A family business
- Agricultural land or farmland
- Shares in a private company
Understanding how the £2.5 million allowance interacts with other inheritance tax reliefs could make a significant difference to the tax payable by your estate.
Have you reviewed how these changes might affect your long-term plans?
Need Help Planning for Inheritance Tax Changes?
If you own a business or agricultural property, it may be worth reviewing your inheritance tax position ahead of the upcoming changes.
At Jon Davies Accountants, we help business owners and families understand the practical steps they can take to plan ahead.
If you’d like to discuss how the APR and BPR changes could affect you, get in touch with Jon or the team today.
We’d be happy to help you plan with confidence.
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