On 23 December 2025, HM Treasury made an announcement confirming the 100% agricultural and business property relief allowance previously stated to be £1 million from 6 April 2026, will be increased to £2.5 million per person.
This is welcome news as the increase in the allowance will provide additional inheritance tax relief of up to £300,000 per person, with an additional £1.5 million of assets receiving the full 100% relief rather than 50%.
However, significant changes to inheritance tax (IHT) are coming and so to avoid an unexpected tax charge, here’s what you need to know and the steps to take before the April 2026 deadline.
The headlines
From 6 April 2026, the rules for Agricultural Property Relief (APR) and Business Property Relief (BPR) will change:
- 100% IHT relief will apply only to the first £2.5 million of qualifying assets per individual.
- Any value above £2.5 million will receive 50% relief, meaning an effective 20% IHT charge.
- Any unused part of the £2.5 million allowance can be transferred to a spouse.
Transitional rules apply to lifetime gifts made between 30 October 2024 and 5 April 2026. These gifts will initially follow current rules but will fall under the new regime if the donor dies on or after 6 April 2026 and within seven years of making the gift.
If tax is payable, then the liability can be paid in ten interest-free annual instalments but only where assets qualify for APR/BPR meaning eligibility for the reliefs is still key and cashflow planning is essential.
What should you do now?
To protect your estate and ensure a tax efficient succession, consider these strategic steps:
1.Review who owns what
It is essential to review land and property ownership within the family to make sure everyone knows who owns what. An assessment of the potential IHT liability
can then be made, the impact of a tax liability assessed, and this will enable you to plan appropriately.
2. Maximise available allowances
There are still significant tax savings to be gained by operating a trading business. Provided the business is ‘wholly or mainly’ trading this can secure BPR on
investments assets such as let property which would not qualify for IHT relief in isolation.
3. Review partnership agreements
A clear partnership agreement supports succession planning, tax efficiency, and legal protection. It takes priority over a Will, so make sure both documents
work together.
4. Review your Will
Well drafted Wills allow you to use the £2.5 million APR/BPR allowance effectively and potentially ‘bank’ the reliefs. Consider:
- Discretionary trusts with letters of wishes for flexibility.
- Deeds of Variation within two years of death.
- Lasting Power of Attorney (LPA) for health and
financial decisions, essential for crisis planning.
5. Consider lifetime gifting
Agricultural land and property or qualifying business property can be gifted during lifetime without triggering a capital gains tax (CGT) charge because a holdover election can defer the gain.
When gifting assets bear in mind:
- The donor needs to survive seven years of the gift for it to fall outside of their estate for IHT purposes.
- The recipient of the gift will lose the tax-free uplift to market value at date of death. Therefore, gift core estate assets that are unlikely to be sold in future.
- Hold onto assets that might have to be sold on death since they benefit from the uplift to market value at the time of death and so Executors could sell these shortly after death without triggering CGT.
- Consider term life assurance to cover the IHT liability over the seven-year gifting period.
- The donor must give up the right to future income and profits from the asset they have gifted otherwise it will be deemed ineffective for IHT purposes.
6. Consider using a trust
Trusts still have a place. They might be useful in the following situations:
- It is still possible before 6 April 2026 to transfer unlimited amounts of qualifying APR or BPR property into trust without triggering a lifetime IHT charge.
- By transferring asset into trust the capital gain can be held over.
- If the intended recipient is not deemed mature enough to take on the asset, a trust allows for continued control and asset protection.
7. Plan for liquidity
If an IHT bill would force asset sales, explore:
- Borrowing facilities or restructuring and ownership.
- Life insurance (possibly in trust) to cover liabilities.
- Updated valuations for clarity on saleability.
8. Look ahead to pensions
From April 2027, pensions will be subject to IHT. Factor this into long-term planning.
Why act now?
The October 2024 Budget reshaped the IHT landscape. These changes bring both risks and opportunities for farming families. Early, proactive
planning is key to preserving wealth and ensuring business continuity.
Want to discuss your options? Contact our team today, we’re here to help you navigate these changes with confidence.
