Agricultural and business property relief: what changed in April 2026? - My Local Will Writer

From 6 April 2026, the rules on farm inheritance tax changed in ways that matter. If your estate includes farmland, farming assets or qualifying business property, your inheritance tax on farms position may now be very different to what it was under the old rules.

The headline change is straightforward. Full 100% relief is no longer unlimited. The first £2.5 million of combined qualifying agricultural and business property in an estate can still attract 100% relief. Anything above that threshold receives only 50% relief, creating an effective inheritance tax rate of 20% on the excess.

For farming families and business owners who structured their estates on the assumption of unlimited full relief, the agricultural property relief 2026 reforms – and the wider APR and BPR changes that came with them – require a fresh look.

What is agricultural property relief?

Agricultural property relief, usually shortened to APR, is an inheritance tax relief that reduces the taxable value of qualifying agricultural property. In broad terms, it applies to agricultural land, farm buildings and in some cases farmhouses that meet the qualifying conditions around ownership and use.

APR has long been important to farming families because land values can be high even where income is modest. Without inheritance tax agricultural relief, passing a farm to the next generation can mean forcing a sale to fund the tax bill.

What is business property relief?

Business property relief, usually called BPR, works in a similar way for qualifying business assets. It can apply to shares in unlisted companies, partnership interests and other qualifying business property. Before April 2026, many estates used BPR to pass business interests on with little or no inheritance tax on those assets.

Together, APR and BPR were among the most effective inheritance tax business relief tools available in estate planning. That position has now changed.

What changed from 6 April 2026?

The reforms were first announced in the Autumn Budget 2024 and took effect from 6 April 2026. The core change is a cap on full relief:

• The first £2.5 million of combined qualifying APR and BPR assets in an estate attracts 100% relief, as before.
• Qualifying assets above £2.5 million now receive only 50% relief, rather than full relief.
• This means the value above the cap is no longer fully outside the inheritance tax calculation – an effective rate of 20% applies to the excess (50% of the standard 40% rate).
• Any unused allowance can be transferred to a surviving spouse or civil partner, meaning couples can potentially shelter up to £5 million in combined qualifying assets at the full 100% rate.

The cap was amended during the Finance Bill’s passage through Parliament, having originally been proposed at £1 million. The final figure of £2.5 million per individual offers considerably more shelter than the original proposal, but what farmers’ groups called the family farm tax remains a significant shift for many estates. These farm tax changes 2026 mark the end of unlimited full relief.

Who is most affected?

If the total value of qualifying APR and BPR assets in your estate is below £2.5 million, and you are making use of the spousal transferability rules, the practical impact may be limited. The biggest changes fall on:

• Farming families with land and property valued above £2.5 million.
• Business owners holding significant shares in unlisted companies or partnership interests.
• Estates that previously relied on unlimited 100% relief to pass assets on entirely free of inheritance tax.
• Anyone whose will or estate plan has not been reviewed since the 2024 Budget announcement.

Land values in many parts of the UK mean that even farms of moderate size can exceed the threshold. For those estates, the new rules on passing on a farm create a genuine inheritance tax liability where none existed before.

What does this look like in practice?

A simple example helps illustrate the difference the cap makes.

Take a farmer who owns agricultural land and buildings worth £3.5 million in qualifying APR assets, with no business property. Under the old rules, all £3.5 million would have attracted 100% relief and passed entirely free of inheritance tax. Under the new rules, the first £2.5 million still attracts full relief. The remaining £1 million receives 50% relief, leaving £500,000 chargeable at the standard 40% rate – a tax bill of £200,000 that did not exist before.

For a married couple in the same position, the picture is better. If both allowances are structured correctly, up to £5 million of qualifying assets can attract full relief between them. On a combined estate of £3.5 million in qualifying property, a couple would likely face no additional liability under the new rules – provided their wills and asset ownership are set up to take advantage of both allowances.

These are illustrative figures only. The actual position depends on how assets are valued, what qualifies for relief, what other assets are in the estate and how the nil-rate band interacts. But they show why the difference between a reviewed estate plan and an unreviewed one can now be measured in tens or hundreds of thousands of pounds.

What about AIM shares and other unlisted investments?

The April 2026 reforms also changed the rules for shares traded on markets such as the Alternative Investment Market (AIM). Previously, qualifying AIM shares attracted 100% BPR after two years of ownership. From 6 April 2026, those shares receive only 50% relief in all cases, regardless of how long they have been held and regardless of the £2.5 million cap.

This is a separate change that affects business owners and investors holding AIM portfolios as part of their estate planning. If you hold AIM shares and have been relying on full relief, that assumption no longer holds.

What about gifts made before April 2026?

One aspect of the reforms that is easy to overlook is the anti-forestalling rule. If you gifted qualifying APR or BPR assets after 30 October 2024 – the date of the Autumn Budget – those gifts are not automatically protected by the old unlimited relief rules.

If you die on or after 6 April 2026 and within seven years of making such a gift, the new rules apply to that gift. The £2.5 million allowance is shared between assets in the estate and assets given away in the seven years before death. A gift that seemed to solve the problem may still use up part of the allowance, leaving less available for the rest of the estate.

This does not mean lifetime gifting is no longer useful. It means it needs careful thought and, in most cases, specialist advice before acting.

What about the nil-rate band?

The standard nil-rate band remains frozen at £325,000 until at least 2030. The residence nil-rate band of £175,000 also remains in place where a qualifying home passes to direct descendants. These allowances still apply alongside APR and BPR, but for estates with significant agricultural or business assets above the £2.5 million cap, the reduction in full relief is likely to be the more significant issue.

Can inheritance tax be paid by instalments?

Yes, in many cases. Inheritance tax on property eligible for APR or BPR can be paid in up to ten equal annual instalments without interest. That can help where the assets in question – farmland, for example – cannot easily be sold to meet an immediate bill.

The instalment option may ease the cash flow pressure, but it does not remove the tax itself. Planning ahead is still far preferable to leaving the next generation to manage a problem after death.

What should farmers and business owners do now?

The starting point is understanding your position. Many people with farms or business interests have not had a formal valuation recently, and do not know whether they are above or below the £2.5 million threshold. That is the first thing to establish, because the answer determines how much planning is actually needed.

Once you have a clearer picture, the steps are:

• Review your will. An old will may have been drafted on the assumption of unlimited full relief. If that assumption no longer holds, the way your assets pass on death may need rethinking – particularly around how allowances are used between spouses or civil partners.
• Check how qualifying assets are owned. The transferable allowance only works if both partners each have qualifying assets to use it against. How ownership is structured can make a real difference to the overall position.
• Consider trust planning. For estates above the cap, a trust may help manage the liability on assets above £2.5 million. This is an area where specialist advice is needed.
• Think carefully before making gifts. The anti-forestalling rules mean that gifts of qualifying assets made since October 2024 can affect how much allowance is available on death. Take advice before acting.
• Get a current valuation. Land and business values change. Knowing where you stand is the foundation of any sensible plan.

A will is not the whole answer to an inheritance tax problem of this complexity – but it is the starting point. Without a properly drafted will, none of the planning around allowances, ownership structures or trust arrangements can work as intended.

Your will is the starting point for all of this. A well-drafted will means your estate is structured as tax-efficiently as possible, your wishes are carried out, and the people you leave behind are not dealing with an avoidable problem. If your will has not been reviewed since the 2024 Budget, now is the time.

Get a quote from My Local Will Writer and take the first step.

Frequently asked questions

What is agricultural property relief? Agricultural property relief (APR) is an inheritance tax relief that reduces the taxable value of qualifying agricultural property, including farmland and farm buildings that meet the ownership and use conditions.

What is business property relief? Business property relief (BPR) is an inheritance tax relief that reduces the taxable value of qualifying business assets, including shares in unlisted companies and partnership interests.

What changed in April 2026 for agricultural property relief? From 6 April 2026, full 100% APR and BPR is capped at £2.5 million per person in combined qualifying assets. Assets above that threshold attract only 50% relief, resulting in an effective inheritance tax rate of 20% on the excess.

Is there now a cap on inheritance tax relief for farms? Yes. From April 2026, full 100% relief is capped at £2.5 million per person in combined qualifying agricultural and business property. Qualifying assets above that level attract only 50% relief.

Do married couples each get their own APR and BPR allowance? Any unused portion of the £2.5 million allowance can be transferred to a surviving spouse or civil partner. This means couples may be able to shelter up to £5 million in combined qualifying assets at the full 100% rate, depending on how assets are owned and how wills are structured.

Do AIM shares still qualify for full business property relief? No. From 6 April 2026, shares traded on AIM and similar markets receive only 50% business property relief in all cases, regardless of how long they have been held. This is a separate change from the £2.5 million cap and applies to all qualifying AIM shareholdings.

Are gifts of farm or business assets made before April 2026 protected from the new rules? Not necessarily. Under the anti-forestalling rules, gifts of qualifying APR or BPR assets made after 30 October 2024 are subject to the new rules if the donor dies on or after 6 April 2026 within seven years of the gift. The £2.5 million allowance is shared between the estate and any such gifts, so a gift made to reduce the estate may still use up part of the allowance.

What should I do if my estate includes agricultural land? Review your will and inheritance tax planning as a priority. The April 2026 changes may mean you now face an inheritance tax liability where none previously existed. Making or updating your will is the first step, and you should consider taking specialist advice on trust structures and how to make the most of available allowances.

Important: This article is for general information only and does not constitute legal or tax advice. Inheritance tax rules are complex and depend on individual circumstances. Always seek advice from a qualified solicitor or tax adviser before making decisions about your estate.