02 Jun Agricultural Property Relief and Business Property Relief – what has changed from April 2026?
Major changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) now affect how farms, rural estates and family businesses are treated for Inheritance Tax purposes in England.
Parmjit Johal, private client solicitor at HRJ Foreman Laws Solicitors explains what the changes mean and what you need to think about when it comes to estate planning.
What are Agricultural Property Relief (APR) and Business Property Relief (BPR)?
APR is an Inheritance Tax relief that can apply to qualifying agricultural property. It is particularly important for farming families and rural landowners.
BPR, is an Inheritance Tax relief that can apply to qualifying trading businesses, interests in trading businesses and certain company shares.
What are the APR and BPR tax relief allowances?
Until April 2026, qualifying agricultural and business assets could often benefit from 100% Inheritance Tax relief, with no overall financial cap. In many cases, this meant that farms and trading businesses could be passed on without Inheritance Tax being payable on those assets.
However, from 6 April 2026, the rules changed. APR and BPR are not being abolished but 100% relief will be capped. Relief above that cap will usually be limited to 50%, which may create a new Inheritance Tax liability for higher-value farms, rural estates and family businesses.
The new rules state that:
- Each individual will have a combined £2.5 million allowance for APR and BPR. Qualifying assets within that allowance will receive 100% relief.
- Any qualifying value above the £2.5 million allowance will now receive 50% relief instead. This means that higher-value farms, estates and businesses may face an Inheritance Tax charge where previously no tax may have been due.
- Any unused £2.5 million allowance can be transferred to a surviving spouse or civil partner.
- Some assets, including shares traded on the Alternative Investment Market (AIM), will receive less generous relief than before.
- Inheritance Tax due on qualifying agricultural or business property can be paid over 10 annual instalments, interest-free, where the assets are inherited on or after 6 April 2026.
What does the £2.5 million combined allowance for APR and BPR mean?
Each individual has a combined £2.5 million allowance for Agricultural Property Relief and Business Property Relief. This means that a person can receive 100% relief on qualifying agricultural and business property up to a combined value of £2.5 million.
Above that level, qualifying assets receive 50% relief.
In practical terms, this means that the effective Inheritance Tax charge on qualifying value above the £2.5 million allowance may be up to 20%, before taking account of other available allowances and exemptions.
How much can be passed on free from Inheritance tax?
A single individual may now be able to pass on up to £2.825 million free of Inheritance Tax by combining the ordinary nil-rate band of £325,000 and the new £2.5 million APR and BPR allowance.
A married couple or civil partners may be able to pass on up to £5.65 million free of Inheritance Tax by using both sets of allowances.
The residence nil-rate band may provide further relief in some cases, but it is circumstance-specific and tapers away for estates valued above £2 million. It should not be assumed to apply automatically.
Can unused allowance be transferred between spouses and civil partners?
Yes. One of the important features of the new rules is that unused APR and BPR can be transferred to a surviving spouse or civil partner. This means that if the first spouse or civil partner does not use their full £2.5 million allowance, the unused amount can be available on the second death.
Where the first death occurred before 6 April 2026, the legislation assumes that a full unused £2.5 million allowance is available for transfer.
This is likely to be particularly important for farming families and family business owners where assets have historically passed between spouses or civil partners before passing to the next generation.
What do the changes mean for farming families?
For farming families, the reforms change the amount of relief available, but not the underlying qualification rules. APR still applies only to the agricultural value of qualifying property. It does not generally cover, hope value, amenity value, development value, residential excess or value that is not properly agricultural in nature.
This distinction matters. A farm may have a market value that is significantly higher than its agricultural value, particularly where there is development potential, diversified use, high residential value or amenity land.
APR takes priority over BPR on the same value. However, BPR may still apply to excess value if that value is genuinely attributable to a qualifying trading business.
For example, where a farming business includes diversified trading activities, BPR may remain relevant, provided the business meets the relevant trading requirements.
Environmental Land Management Agreements and APR
A further important development for English rural estates is the extension of APR to land managed under an environmental land management agreement.
From April 2025, land subject to such agreements can qualify as agricultural property for APR purposes.
This is particularly relevant for estates and farms moving land into environmental schemes, conservation arrangements or land management projects. In appropriate cases, the change may help preserve APR where land use is evolving away from traditional farming.
This does not mean that all rural land automatically qualifies. The land must still fall within the statutory conditions, but the change broadens the class of land capable of attracting APR.
What do the changes mean for business owners?
BPR continues to be available for qualifying business assets, including a trading business, an interest in a trading business and shares in an unlisted trading company.
However, from 6 April 2026, 100% Inheritance Tax relief is only available within the combined £2.5 million relief allowance.
Above that allowance, relief is reduced to 50%.
This is a significant change for owner-managed businesses, family companies and succession planning structures. A trading business may still qualify, but the availability of full relief is now limited by value.
Businesses that are mainly investment businesses remain outside BPR. This means that companies or businesses primarily holding investments, rental property portfolios or passive assets may not qualify.
Has relief been reduced for Alternative Investment Market Shares?
The changes also affect certain unquoted shares traded on markets that do not meet HMRC’s definition of “listed”. Traded shares on the Alternative Investment Market (AIM) are an example of this. Previously, AIM shares were commonly used in BPR planning because they could potentially qualify for 100% relief after the relevant holding period, provided the conditions were met.
From 6 April 2026, these shares qualify for 50% relief, rather than 100% relief.
What are the Inheritance Tax instalments?
Another important change concerns payment of Inheritance Tax attributable to APR and BPR assets.
For assets inherited on or after 6 April 2026, Inheritance Tax owed can be paid over 10 annual instalments. Those instalments are interest-free on the outstanding balance.
This may help ease cashflow pressure for farming families and business owners who inherit valuable but illiquid assets, such as land, farm buildings, trading premises or private company shares.
Example of how it could work for a single farm owner
A single farm owner dies after 6 April 2026 holding qualifying agricultural and business assets worth £4 million. Assuming the assets qualify and no other reliefs or exemptions apply:
- £2.5 million may qualify for 100% relief;
- The ordinary nil-rate band may cover a further £325,000;
- The remaining value may receive 50% relief;
- The balance may be subject to Inheritance Tax of £170,000.
Example for a married couple or civil partners
A spouse from a married couple or civil partner dies after 6 April 2026. They held qualifying agricultural and business assets worth £4 million. Assuming the assets qualify, no other reliefs or exemptions apply and the allowances are available and properly transferable:
- Up to £5.65 million may qualify for 100% relief so no Inheritance Tax needs to be paid.
- Where assets exceed £5.65 million, two ordinary nil-rate bands may cover a further £650,000
- The remaining value may receive 50% relief
How can farms and family businesses plan effectively under the APR and BPR rules?
Succession planning is even more important for farms, rural estates and owner-managed businesses. Families and business owners will need to understand what their assets are worth, including the difference between agricultural value, market value, development value and any “hope value”.
It will also be important to identify which assets qualify for APR, which may qualify for BPR, and which may not qualify for relief at all.
Married couples and civil partners should also consider how transferable unused allowances may affect the overall Inheritance Tax position.
Finally, even though some Inheritance Tax may be paid over 10 annual interest-free instalments, estates should still consider how any tax liability will be funded. The reduced relief for AIM portfolios also means that this type of BPR planning may be less attractive than it was before.
For more information
- Securing your future and your family’s legacy
- Will writing services
- Next of kin – it may not mean what you think
For legal advice
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