Inheritance Tax Changes for Farming Families and Business Owners: What the New Agricultural Property Relief & Business Property Relief Rules Mean for You.

The past two years have brought some of the most significant changes to Inheritance Tax (IHT) reliefs in a generation, particularly for those relying on Agricultural Property Relief (APR) and Business Property Relief (BPR) to pass farms and family businesses to the next generation. These reliefs have long been central to succession planning in the rural economy, helping protect working farms and trading businesses from substantial tax liabilities on death.

However, a series of announcements in the 2024 and 2025 Autumn Budgets, followed by further changes in December 2025, have reshaped how APR and BPR operate. New thresholds, new caps, and the introduction of transferability between spouses mean that many families will benefit from increased allowances. However, the reforms also create new complexities, particularly for larger estates or those with development value.

For farming families, landowners and rural business owners, it is now more important than ever to review wills, partnership agreements and ownership structures to ensure that relief is maximised and future growth is protected.

A Timeline of the Changes

Autumn Budget 2024

The Government announced that the 100% rate of APR and BPR would be capped at £1 million of qualifying assets per individual, with 50% relief applying above that threshold. This relief was not transferable between spouses.

Autumn Budget 2025

The Government confirmed that the APR/BPR allowance could be transferred between spouses, similar to the Nil Rate Band allowance.

23 December 2025

Following industry feedback, the Government increased the 100% relief threshold from £1 million to £2.5 million, effective from 6 April 2026. This means that:

• Each individual has a £2.5 million allowance for 100% APR/BPR
• Qualifying assets above that receive 50% relief
• The allowance is fully transferable, giving married couples and civil partners £5 million at 100% relief

The Government estimates that around 85% of estates claiming APR in 2026/27 will not pay any additional Inheritance Tax under the new rules, according to its official update “What are the changes to agricultural property relief?” published on 23 December 2025.

Understanding the New APR & BPR Rules

APR

APR continues to apply only to the agricultural value of agricultural property - the value the land would have if used solely for agricultural purposes. It does not cover development or hope value.

BPR

From April 2026, the rate of BPR for certain “not listed” shares (such as AIM shares) will reduce from 100% to 50%.

What the Changes Mean for Farming Families

Joint Ownership Still Matters

Although the relief is now transferable, joint ownership can still be advantageous. If one spouse dies owning all of the land, the survivor inherits both the land and the unused APR/BPR allowance. However, joint ownership may allow relief to be used, and therefore secured, on the first death.

Securing relief early can protect against future legislative changes, and may help manage the impact of rising land values over time. For some families, this could reduce their exposure to the £2.5 million cap on the second death.

Why You Should Review Your Succession Planning Now

Although the reforms are intended to protect most family farms, the rules are still complex, and farmland values continue to rise. It is sensible to review:

• How the farm is owned
• Whether your current will structure remains appropriate
• Whether development value could create an unexpected IHT exposure
• Whether your estate may exceed the new thresholds

Every family’s circumstances are different, and the right approach will depend on ownership, business structure, and long term plans for the farm.

What Can We Do?

Our Private Client Team understand the complexities facing farming families, especially with the recent changes to APR and BPR. We offer clear, practical guidance on structuring your affairs, updating your wills, and planning for succession so that your farm or business is protected for the next generation. We can help you make the most of the available reliefs, reduce the risk of future claims, and ensure your wishes are carried out with confidence.

If you would like advice on how these changes affect your estate, our Private Client Team is ready to support you.