You may recall from a previous blog that from 6 April 2026, significant updates will redefine Agricultural Property Relief (APR) and Business Property Relief (BPR) under UK inheritance tax (IHT) rules. Since the initial changes were announced, there have been some updates:

• The 100% relief cap increases from £1 million to £2.5 million per individual, for combined qualifying assets. This means any value over £2.5 million will still benefit from 50% relief, resulting in an effective tax rate of 20% on the excess.
• Unused allowance can be transferred between spouses or civil partners, enabling couples to potentially pass up to £5 million in qualifying assets without tax. 

Why the change?

This update follows widespread feedback from farmers and small business owners who were worried that the original £1 million cap would jeopardise generational transfer of farms and trading businesses. The government estimates that the increase will halve the number of estates facing additional inheritance tax, from around 375 to roughly 185 annually, and prevent 85% of APR claimants from paying more IHT.

Practical implications

• Qualified assets include farmland, agricultural buildings, trading business interests, unlisted shares, and certain AIM-listed investments.
• Above £2.5 million, only half the value qualifies for relief, so an effective tax rate of 20% (rather than the usual 40%).
• The relief allowance refreshes every seven years for individuals and every ten years for trusts and will eventually track inflation (anticipated from April 2031).

What you should do

Although this revision marks a major step towards safeguarding smaller farms and family businesses and, as such, hopefully making succession planning more straightforward and less taxing, it is still important to plan ahead to make sure that you are making the most of the allowances available.

For more information

For more information or advice on APR, BPR or IHT, please contact me.