UK Government increases IHT relief to Agricultural and Business Property

The UK Government has announced a significant revision to its inheritance tax (IHT) relief regime for agricultural and business assets, substantially increasing the threshold at which 100 % relief is available for qualifying estates. The changes, set to take effect from 6 April 2026, come after considerable stakeholder feedback and industry concern, particularly from farming and business communities. 

Key changes announced

In response to that feedback, on 23 December 2025 the government confirmed it would raise the 100 % relief threshold to £2.5 million per individual, effectively increasing the combined allowance to £5 million for married couples or civil partners where unused allowances are transferable. This change will apply to both APR and BPR on death and relevant lifetime transfers from 6 April 2026. 

Under the revised regime:

• The cap on 100 % relief for both Agricultural Property Relief (APR) and Business Property Relief (BPR) has been increased from the originally proposed £1 million to £2.5 million per individual.
• Above this £2.5 million threshold, qualifying assets will attract 50 % relief, effectively leading to a reduced rate of inheritance tax (up to 20 %) compared with the standard 40 % tax.
• The allowance is transferable between spouses and civil partners, meaning a couple can shelter up to £5 million of qualifying assets before higher charges apply. 

According to government estimates, around 85 % of estates claiming APR in 2026–27 will not pay more IHT as a result of these reforms, significantly fewer than previously forecast before the threshold increase. 

Why the Change Matters

APR and BPR have long helped family farms and small businesses by allowing qualifying agricultural land, commercial property and unlisted business assets to pass from one generation to the next free of inheritance tax. Without reforms, unlimited relief meant some very high-value estates could escape significant IHT bills, while ordinary, smaller estates paid tax due to holding non qualifying assets. 

The government says the revised cap strikes a balance between protecting family businesses and ensuring that very wealthy estates contribute to public finances, particularly as property and business valuations have risen sharply. 

Impact on Wills and Succession Planning

1. Valuation and Structuring of Estates: Estate planners and solicitors are urging families with significant agricultural or business assets to review their wills now. With relief capped, assets above the £2.5 million threshold will no longer benefit from full exemption, which could significantly alter the effective inheritance tax bill. Many estates that previously faced no tax liability will now need to consider how much tax is payable and how it will be funded. 
2. Trust Planning: The reforms also affect trusts holding qualifying property. The £2.5 million cap will apply to trusts as well, and trustees must prepare for annual and exit charge calculations that reflect the reduced relief rates above the cap. This may prompt trustees to revisit trust deeds, the timing of property settlements, and potential lifetime gifting strategies to maximise relief before the reforms take effect.
3. Succession Strategies: For family businesses and farms, the changes heighten the importance of structured succession planning. Owners may consider options such as:
   •    Gifting property during lifetime, potentially outside the charge to IHT if done more than seven years before death. 
   •    Reorganising ownership structures, including share-holding adjustments in unlisted trading companies, to maximise relief.
   •    Life insurance and cash planning to ensure heirs can meet any tax liabilities without selling core assets.
4. Spousal Transfers: The enhanced transferability of the relief cap between spouses provides valuable flexibility, especially for couples where one partner’s estate may be below the threshold and the other’s above it. Wills and succession documents should be reviewed to recognise this new mechanism and utilise it fully. 

Next Steps

The government’s decision to raise the threshold, alleviates some of the pressure on family farms and SMEs, however planning is now more complex; trustees and personal representatives need to understand the new valuations, relief bands, and administrative requirements ahead of the April implementation.

For families with significant agricultural land or business interests, beginning or updating IHT planning now, including reviewing wills, trust arrangements, and succession plans — is essential to avoid unanticipated tax liabilities under the new regime.

Farms and estates previously untroubled by inheritance tax must now consider strategic planning sooner rather than later, especially if their combined agricultural and business property nears or exceeds the £2.5 million cap.

For more information and to discuss these changes further, please contact Sophie Wales, Head of Wills, Trust and Probate on SophieW@moore-tibbits.co.uk or call 01926 491181.