What is changing
Currently, qualifying agricultural property and business assets can receive 100% relief from inheritance tax, regardless of value. From 6 April 2026, 100% relief will be capped at a combined threshold of £2.5 million per person.
Above this threshold, relief reduces to 50%. This means an effective inheritance tax rate of 20% on the excess value (half the standard 40% rate).
The threshold covers both Agricultural Property Relief (APR) and Business Property Relief (BPR) combined. You cannot claim £2.5 million for APR and a further £2.5 million for BPR — the total across both reliefs is £2.5 million per person.
- Changes take effect
- 6 April 2026
- 100% relief cap (individual)
- £2.5 million (APR and BPR combined)
- 100% relief cap (couples)
- £5 million (transferable between spouses)
- Effective IHT rate above cap
- 20% (50% relief, so half the standard 40% rate)
- AIM-listed shares (from April 2026)
- 50% BPR only (reduced from 100%)
- Ownership requirement
- 2 years before death
- Instalment option
- 10 annual interest-free instalments (for qualifying property)
Who is affected
The changes primarily affect:
- Farm owners with combined APR/BPR qualifying assets above £2.5 million (or £5 million for couples)
- Family businesses with significant business property qualifying for BPR
- AIM investors — shares in AIM-listed companies will only receive 50% BPR relief from April 2026
Farms under the threshold continue to receive 100% relief and pay no inheritance tax on qualifying assets. However, land values can rise significantly, so even farms currently below the threshold should plan ahead.
Planning options to consider
Several planning strategies may reduce your exposure:
- Lifetime gifts: Gifts of agricultural or business property become exempt after 7 years (potentially exempt transfers), but you lose your CGT base cost and gifts with reservation of benefit do not work
- Partnership restructuring: Each partner in a farming partnership has their own £2.5 million threshold — restructuring ownership may help
- Insurance: A life insurance policy written in trust can provide funds to pay any IHT liability without forcing a farm sale
- Instalment payments: IHT on qualifying property can be paid in 10 annual interest-free instalments, which may be manageable from farm income