Changes to inheritance tax, and to Agricultural and Business Property Relief, were announced by Rachel Reeves in her recent Budget that have caused considerable concern to farmers and business owners across the UK.

Let’s look at what’s changing and what this could mean for you…

What are Agricultural and Business Property Relief?

Agricultural Property Relief (APR) is a type of inheritance tax relief that helps reduce the amount of tax that is paid when farmland is being passed down to the next generation. Currently, the relief has no financial limit, meaning regardless of the value of the farmland, it could be passed on with no inheritance tax payable.

Business Property Relief (BPR) is similar but relates to business assets included in a person’s estate. Again, this relief currently applies without any financial limit to the relief.

Clearly, both reliefs have played an important role in families being able to pass on agricultural and business assets without having to worry about inheritance tax.

What changed in the Budget?

Based on the Autumn Budget announcement, there will be a new £1 million limit where 100% relief will be given. The relief will then reduce to 50% on the value that exceeds £1 million.

It is important to note that the £1 million allowance is a combined one for APR and BPR purposes. An estate that has both qualifying business and agricultural assets will only have a single £1 million allowance to use.

In addition, quoted shares that are designated as ‘not listed’ on the markets of recognised stock exchanges, such as AIM, will only ever get 50% relief regardless of whether they would otherwise qualify as agricultural or business assets.

When will the change take effect?

The intention is that this change will take effect from 6th April 2026. So, these changes do not take immediate effect and mean that there could be some scope for planning or transferring of assets that will minimise your exposure to inheritance tax when the new limits come into force.

What is the likely impact on Farmers and Business Owners?

The farming community has expressed huge concerns about these changes. The Country Land and Business Association (CLA) estimates that these reforms could affect up to 70,000 farms.

Many farmers worry that the new rules could force them to sell parts of their family farms to pay inheritance tax bills, even if they have worked on the farm for many years. The fear is that the changes could lead to the breakup of family farms and have wider implications for rural communities and land management practices.

If I have agricultural assets valued at more than £1million; will I have to pay Inheritance Tax?

Not necessarily.

Inheritance tax is calculated by first deducting any reliefs (such as APR and BPR) and then deducting any allowances that apply. Each individual has a nil rate allowance, currently £325,000, and there is a residence nil-rate band limit of £175,000.

What should I do now?

If your estate is likely to be subject to inheritance tax, then it can pay to consider using some estate planning strategies to reduce your exposure to inheritance tax before the changes come into effect on the 6^th April 2026. 

1. Assess your estate: Review the current value and composition of your estate, particularly focusing on agricultural and business assets.

2. Consider asset transfers: There may be opportunities to transfer assets before the new rules come into effect. However, this should be done carefully and with professional advice.

3. Review business structures: Examine your current business structure to ensure it’s optimised for the new relief regime.

4. Explore other reliefs and exemptions: Remember that other inheritance tax reliefs and exemptions, such as the nil-rate band and residence nil-rate band, will still be available.

5. Long-term planning: Consider how these changes might affect your long-term succession plans for your farm or business.

Please get in touch with us if you’d like any help with doing this, or if you’d like to discuss whether there are any estate planning strategies that are open to you. 

As we approach the implementation date for these changes it’s crucial to stay informed about any further developments or clarifications; we’ll communicate them here as usual, but there’s no replacement for a detailed conversation around your own circumstances so please do contact us if you’d like to discuss any of the above.