Inheritance tax: How is agricultural and business property relief changing from 6 April 2026?

What is business property relief?

Business property relief (BPR) is an inheritance tax relief which applies to qualifying business assets. It was originally introduced in 1976 to allow businesses to be passed down either inheritance tax (IHT) free or at a reduced rate without the family of the deceased having to sell the business. 

What is agriculture property relief?

Agricultural Property Relief (APR) is an inheritance tax relief, which helps farmers and landowners pass on agricultural property without a large tax bill, either during their lifetime or when they die.

What are the current rules?

BPR is available to business owners who hold qualifying business assets for at least two years and continue to hold them on their death.

100% relief is available for:

• A sole trader or partner interest in a trading business.
• A holding of shares in an unquoted company, including shares listed on the Alternative Investment Market (AIM companies).
• Enterprise Investment Schemes (EIS).

50% relief is available for:

• A controlling holding of shares in a quoted company.
• Land, buildings, machinery or plant used wholly or mainly for the purposes of the business.

APR is available to farmers who have either occupied and actively farmed the land for a minimum of two years or owned the land for at least seven years while it has been farmed by another person.

100% relief is available:

• If the land is actively farmed by the owner or let under a qualifying tenancy.

50% relief is available:

• If the land is owned but not directly farmed by the owner.

What is changing from 6 April 2026?

• Individuals will have a £1 million (100% relief allowance) which will apply to the combined value of assets that qualify for 100% agricultural property relief (APR) and/or 100% business property relief (BPR).
• The £1m allowance will apply during lifetime and on death, meaning that qualifying assets that have been gifted on or after 30 October 2024 where the donor dies on or after 6 April 2026 will reduce the allowance available on death.
• For lifetime gifting the 100% relief allowance will refresh every seven years and will be increased in line with the Consumer Prices Index from April 2031. However, it should be noted that this won’t be automatic, and a future government would need to implement a statutory instrument.
• For relevant property trusts there will also be a £1 million allowance (100% trust relief allowance). The 100% trust relief allowance will refresh every 10 years.
• 50% relief will then be available on qualifying assets more than the £1 million allowance, meaning an effective IHT charge of 20%. This will apply to both individuals and trusts.
• Shares in companies designated as “not listed” on the markets of recognised stock exchanges (AIM companies and EIS companies quoted on AIM), will only be entitled to relief at 50%.
• Trust exit charges will be standardised meaning all relevant property trust exit charges will be calculated on unrelieved values (before APR/BPR) regardless of whether the exit takes place before or after the first 10th anniversary.
• On death any individual’s unused allowance can be transferred to a spouse or civil partner, even if first death occurred before 6 April 2026. Until the Finance Act is published we are unsure whether the two year holding period is also transferable.
• The option to pay IHT by up to 10 equal annual instalments, interest free, will be extended to all property eligible for APR/BPR.

Things to consider

• Need to understand IHT liability under the new rules and consider how this is to be funded. Can a life policy be taken out (placed in trust) to meet this liability.
• Should succession planning be brought forward? Maybe introduce family members earlier. Can you gift qualifying assets during lifetime with the hope of surviving seven years. 
• Before 6 April 2026 you can gift without any immediate IHT charge regardless of the value transferred. However, if death occurs after 6 April 2026 and within seven years of the transfer, the £1 million allowance will apply retrospectively for the purposes of recalculating the IHT on the failed transfer.
• As with any gifting, consideration needs to be given to other tax implications, for example, capital gains tax.

As always, professional advice will need to be sought regarding both the legal and tax implications.