Navigating the 2026 changes to agricultural and business property relief

Farmers and family business owners face significant challenges in the wake of the announced changes to agricultural property relief (APR) and business property relief (BPR) effective from April 2026, which were announced in the October Budget.

Currently, APR provides 100% IHT relief on the agricultural value of qualifying assets, and BPR offers 100% IHT relief on the market value of eligible business assets. This relief has long been a valuable succession planning tool for farmers and other business owners, allowing property to be passed down the generations without heavy tax burdens. However, this is about to change.

Key changes to APR and BPR

The proposed changes will be subject to a consultation and so the full detail is not yet available. Under the new rules, effective April 2026, a combined cap of £1 million will apply to both APR and BPR. This cap will limit 100% IHT relief to the first £1 million of eligible agricultural and business property, with any remaining value thereafter receiving only a 50% IHT relief rate. Any part of the £1 million allowance left over cannot be transferred to a surviving spouse or civil partner.

Additionally, an increase in employer National Insurance contributions will raise day-to-day operating costs, adding further strain on business owners already affected by the APR and BPR changes.

The upcoming changes will also impact transfers into trust of assets that benefit from APR and BPR, and gift transfers:

• Where a settlor has set up more than one trust before 30 October 2024 each trust will have its own £1 million relief allowance. However, where a settlor sets up multiple trusts after this date the £1m allowance will be shared between the trusts. So, if a settlor sets up four trusts each trust will have an allowance of £250,000 for APR and BPR combined.
• Outright gifts and gifts into trusts made within seven years of death will be subject to the new relief cap. Gifts made before 30 October 2024 will continue to receive 100% relief, but any made after this date will be subject to the reduced relief structure.

Despite these changes, the seven-year rule for gifts remains unaffected - gifts made to individuals more than seven years before death remain outside the scope of IHT. This allows property owners to potentially pass down their assets to the next generation early, although this may not be a practical option for farmers and business owners who are financially reliant on their assets.

AIM shares

Non-listed investments, such as AIM shares, will also see a reduction in relief to 50% without access to the £1 million capped deduction.

Preparing for the future

As the new APR and BPR rules take effect, individuals with significant agricultural or business assets may wish to take advice to review any planning that has taken place previously. . Every family's position is different. Careful preparation of Wills and robust succession planning will be necessary to ensure relief claims can be maximised.

For advice on the upcoming changes to changes to agricultural and business property, please contact Judith Cuxson, in our Private Client team on 07788 313 462. Alternatively, you can fill out the form below.