Changes to Inheritance Tax Reliefs
The government recently announced major changes to the planned reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR). These amendments reshape the way many farming families and rural businesses will plan for the future. Because these reliefs play a crucial role in managing inheritance tax, the updated thresholds have attracted considerable attention. The increase in the 100% relief limit from £1 million to £2.5 million will take effect from 6 April 2026. The Finance Bill 2025 will introduce the change. Above the new threshold, qualifying assets will attract only 50% relief. This shift aims to provide more targeted support while reducing unintended pressure on smaller estates.
Understanding the impact on Agricultural and Business Property Relief
The adjustments mean that spouses and civil partners can pass on up to £5 million of qualifying agricultural and business assets between them free of inheritance tax. This amount applies in addition to the existing nil rate bands. Importantly, the transferable allowance will also extend to surviving spouses or civil partners who were widowed before the announcement. This ensures the reform remains fair and protects those affected by earlier estate planning decisions.
Agricultural and Business Property Relief and estate planning
These changes represent an evolution of the proposals first outlined in the Autumn Budget 2024. At that time, many farming groups and rural business owners raised concerns. They feared the reforms would harm small farms and family‑owned enterprises. By increasing the threshold, the government now intends to refocus the rules on the largest estates. It estimates that around 85% of estates claiming APR in 2026–27, including those also using BPR, will pay no additional inheritance tax. Consequently, the vast majority of farming families should see no increase in tax liability under the revised plan.
Treatment of shares not listed on a recognised exchange
The updated announcement does not affect the previously proposed change for unlisted shares. Shares designated as “not listed”, including those traded on AIM, will receive BPR at a reduced rate of 50% from April 2026. Previously, they qualified for 100% relief. Although this measure remains controversial, it reflects the government’s aim to align reliefs more closely with levels of risk and asset liquidity.
Why these changes matter
These reforms will influence long‑term succession strategies. Families holding agricultural land, farmhouses or business assets should review their estate plans soon. Although many estates will remain unaffected, the new thresholds may alter how larger estates structure ownership. Clear documentation and updated valuations will help ensure that relief claims remain valid. As the deadline approaches, professional advice may be essential.
