Associate Sophie Ashford, in our Wills, Probate, Tax & Trusts team, provides an update on what is changing in relation to Agricultural Property Relief following a series of announcements by the government.
The Autumn Budget in October 2024 sent shockwaves through the farming community by announcing that the government plans to significantly reform the Inheritance Tax (IHT) reliefs - Agricultural Property Relief (“APR”) and Business Property Relief (“BPR”) - from 6 April 2026. These reliefs have long been essential in helping to ensure that working farms can be passed down through generations without triggering unaffordable tax liabilities.
Agricultural Property Relief - What is Changing?
The original government proposals introduced a cap of £1 million of qualifying agricultural and business assets (combined) on the availability of 100% relief (previously unlimited), with remaining qualifying assets receiving a reduced 50% relief.
Following extensive lobbying by various farming organisations, including the NFU and CLA, the Autumn Budget a year later in November 2025, brought a partial concession - the £1 million cap would be transferrable between spouses and civil partners if unused on the first death (mirroring the rules for the Nil Rate Band and Residence Nil Rate Band). Whilst a welcome move, many farmers felt that this change was still not enough.
In a surprise announcement on 23 December 2025, the government made a major amendment to the proposed changes - the £1 million cap would be increased to £2.5 million.
For many farming families, this change offers significant reassurance. However, the reforms still represent a major shift in the tax landscape, and it remains crucial for farmers to review their affairs to ensure reliefs are maximised, Inheritance Tax exposure is minimised, and the long‑term succession of the family farm is protected.
The current position - A brief overview
- The first £2.5 million of qualifying agricultural and business assets (combined) will receive 100% APR/BPR.
- Qualifying agricultural and business assets exceeding £2.5 million will receive 50% APR/BPR - an effective Inheritance Tax rate of 20% on those assets based on current rates.
- Unused allowances are transferrable between spouses and civil partners, resulting in a potential combined allowance of £5 million on the second death.
- Where the first spouse/civil partner died before 6 April 2026, the full allowance is deemed to be automatically available to be transferred.
- Any Inheritance Tax due on qualifying agricultural and business assets can be paid in equal annual instalments over 10 years, interest free.
What should farmers do now?
- Review Wills and succession planning
Existing Wills may no longer be tax‑efficient under the new rules. Reviewing your Will is essential to ensure reliefs are fully utilised and your wishes for the future of the farm are protected.
- Understand the impact of the changes
Every farm is different. It’s important to assess how the new rules affect your specific circumstances and take practical steps to mitigate any potential tax liability.
- Review valuations
Accurate, up‑to‑date valuations of land, buildings, and live and dead stock are now more important than ever.
- Plan for how any tax will be paid
Consider cashflow planning or insurance options to ensure that any Inheritance Tax liability can be met without jeopardising the farm’s operations.
Our leading Wills, Probate, Tax & Trusts team can advise on all aspects of Wills and Estate Planning. Please get in touch if you would like to discuss your individual situation, needs and aims with a member of our team.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
