Inheritance Tax (IHT) planning remains a cornerstone ofestate succession planning for families holding significant agricultural landor business interests. Historically, Agricultural Property Relief (APR) andBusiness Property Relief (BPR) have offered powerful tax planning tools byreducing or eliminating the IHT payable on qualifying assets. However, reformscoming into effect from 6 April 2026 mean the landscape is shifting and if youhave substantial amounts of farming land, rural estates, family businesses orsubstantial holdings in private, unlisted companies, you will need tounderstand the implications and practical steps you can take to minimise theimpact on your family’s wealth.

What Is Changing?

A Cap on 100% Relief

Under current rules, qualifying agricultural land andbusiness assets can benefit from 100% relief from IHT, with no upper limit aslong as certain qualifying conditions are met.

The Autumn budget of 2024 announced that, from 6 April 2026,this will change and there will be a cap on the value of assets eligible for100% relief from inheritance tax. Qualifying assets over this threshold willonly receive 50% relief. This effectively means that IHT of half the standardrate will be paid on the value of assets above the threshold. The standard rateof IHT is 40%.

The initial proposal was that the cap for 100% relief wouldbe £1 million however, following significant lobbying from business and farmingorganisations, an announcement was made as late as 24^th December2025 that the threshold would be raised to £2.5 million per estate. (HM Revenue and Customs, 2026)

Transferability Between Spouses and Civil Partners

In a key concession after consultation and stakeholderfeedback, it was announced in the Autumn budget of 2025 that the new allowancewill be transferable between spouses and civil partners. So, if one partnerdoes not use the full relief on their death, the unused portion can be passedto the survivor, much like the existing Nil-Rate Band and Residence Nil-RateBand.

The announcement in December 2025 confirmed that the full£2.5 million allowance  would benefitfrom the transferability previously announced. (HM Revenue and Customs, 2026)

This means that a couple could potentially shelter £5million of qualifying assets at 100% relief, providing some scope for estateplanning when assets are jointly held.

Shares & Other BPR Changes

The new rules also limit BPR on shares listed on markets “notrecognised stock exchange”, which includes qualifying Alternative InvestmentMarket (AIM) shares. Currently, qualifying AIM shares benefit from 100% BPRwith no limit. However, under the new rules they will only receive relief at50% and their value is not included in the £2.5 million threshold.

To qualify for BPR “unlisted” shares such as those traded onAIM have to meet certain criteria which includes being trading businessesrather than investment companies such as property businesses.

Why These Changes Matter

APR and BPR have long been pivotal in helping familiespreserve and pass on farms and small businesses across generations. Withoutreform, some farms and enterprises cumulatively worth many millions could passon tens of millions of pounds tax-free, triggering political and public debateabout fairness.

Whilst the Government’s change of stance will address theseconcerns to a degree, there will be businesses that are “asset-rich” but“cash-poor”, that will be caught out by the new IHT and it may impact theirviability when they get passed down the generations.

While the vast majority of estates claiming APR and BPR areexpected still to pay no additional IHT post-reform, a small but significantminority of larger estates could face significant IHT charges. If this mighteffect your estate or that of your parents or other family members you shouldstart planning as early as possible.

Planning Implications and Practical Steps

If you own agricultural or business assets that currentlyqualify for APR or BPR and which are worth over £2.5 million now, or may be inthe future, there are steps you can take to minimise the impact IHT will haveon your estate. This also applies if you are likely to be the beneficiary ofsuch an estate.

This is a complicated area of tax planning and it is crucialthat you seek professional advice. However, some of the planning steps you cantake are:

Early Review of Ownership Structures

With relief caps now in place, the way assets are held andowned becomes more important:

• Joint - ownership and spousal planning can make effective use of transferability.
• Splitting - ownership of assets between spouses or civil partners can help maximise the combined relief thresholds and defer tax triggers.

Timely Valuations and Forecasting

Given the threshold limits, accurate valuations ofqualifying land and business interests are critical. Forecasting your estate’sfuture IHT exposure under the new regime will be essential to help you makeinformed strategy decisions.

Use of Trusts and Lifetime Transfers

The threshold for 100% relief is an allowance which meansthat, under IHT rules, a gift of qualifying assets remains part of your taxableestate for 7 years after it is made, after which it doesn’t form part of yourestate or threshold.

So by making gifts either direct to beneficiaries or intotrusts you may increase the amount of your estate that can be passed on free ofIHT, as the gift won’t form part of your estate as long as you survive 7 yearsafter it is made.

Again, professional advice is vital as transfers ofassets may be subject to capital gains tax (CGT) at the time they are made.

Conclusion

The reforms to APR and BPR mark a significant changethe UK’s inheritance tax regime for agricultural and business assets, aiming tocurb unlimited reliefs while preserving some protection for family-runbusinesses and farms. However, if your family is effected now, or may be in thefuture, careful planning as early as possible can reduce the considerableimpact an IHT charge might have on the future of your estate.

Please note – The above is for information only purposes and does not constitute advice. You should seek professional advice before taking any action. Tax rules and reliefs are subject to change

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