Ever since they were announced at Autumn Budget 2024, the Government’s reforms to Agricultural Business Relief (APR) and Business Property Relief (BPR) have been a source of great concern to many owners of farms and family businesses. This has been particularly the case for farmers, who worry that an Inheritance Tax (IHT) bill may be unaffordable given the combination of small farming incomes and high land values, and therefore that succession to the next generation may become unviable.
However, in a rare bit of good tax news, the Government announced a pair of changes late last year that will both save tax and somewhat simplify planning.
The changes
For a full explanation of the reforms as originally proposed, see our previous article. In brief, they mean that from 6 April 2026 a cap will be introduced on the total value of property on which APR and BPR can be claimed at the rate of 100%. Anything above that threshold will be limited to 50% relief.
The first change to the proposed reform came at the 2025 Budget, when it was announced that the threshold would become transferable between a married couple or civil partners. In other words, if the person who died first did not fully utilise their own 100% allowance (for example, because they left the assets qualifying for relief to their spouse/civil partner), the person who died second would then be able to claim a double allowance.
Significantly, the Government confirmed that this would apply even where the first person had died before the reforms were announced. This will therefore avoid one of the significant points of unfairness that had been identified with the original proposals, in which a person who had been widowed before Autumn Budget 2024 would have missed out on the opportunity to take advantage of their deceased spouse/civil partner’s allowance.
The second change was slipped out in a press release on 23 December 2025, although no doubt will have come as a welcome Christmas present for many families. This increased the allowance for 100% relief from £1 million to £2.5 million.
What it means for you
These changes will clearly be good news for owners of family businesses and agricultural land. Two key benefits are:
- the transferability of the allowance means that it will no longer be as necessary to structure estate planning in such a way as to utilise the allowance on the first death (for example, by giving a share of the land/business to children or a trust); and
- the increased thresholds can reduce IHT bills for anyone with a farm or business worth more than £1 million, and for some may mean they no longer have an IHT bill at all.
However, despite these changes, careful planning and expert advice will still be very important.
For one thing, many families will still find themselves with a sizeable IHT bill even with the increased threshold. They may benefit greatly from proper estate planning advice. The best strategy will of course depend on their particular circumstance, but could for example include lifetime gifts of land, company shares or partnership capital, or redirecting assets into a trust (which will still benefit from their own separate £1 million allowance for 100% relief).
Moreover, it is important to remember that the conditions for claiming APR and BPR have always been very strict and full of traps for the unwary. Very small details may result in a loss of relief (and therefore a vastly-higher tax bill) if not spotted in time.
If you are planning to rely on APR or BPR as part of your own succession plan, please do contact the Private Wealth and Tax team at Quastels, who have a great deal of specific experience in this area. We can review your current arrangements and identify the risks and opportunities you need to consider.
