Inheritance Tax Reliefs for Farms and Businesses: What the New Rules Will Look Like from April 2026

Following a year of uncertainty and concern across the farming and business communities, the Government has now confirmed its revised approach to Agricultural Property Relief (APR) and Business Property Relief (BPR) for Inheritance Tax (IHT). The final version of the policy, published shortly before Christmas, represents a partial softening of the earlier proposals and provides greater clarity on how these important reliefs will operate from April 2026.

While the changes still introduce new limits and restrictions, the revised framework is more generous than first anticipated and gives families, farmers and business owners a clearer basis on which to plan for the future.

What’s Changing?

• A new £2.5m relief allowance
  From 6 April 2026, individuals will have a £2.5m allowance that can receive 100% IHT relief across the combined value of qualifying APR and BPR assets. This allowance replaces previous £1 million relief and is applied before any IHT is charged.

• Relief above the allowance is at 50%
  Qualifying assets above £2.5m will not lose relief entirely as they will attract 50% relief, meaning the effective IHT rate on the excess is 20% (half the standard 40%).

• Spouse/civil partner transferability
  Any unused part of the £2.5m allowance can be transferred to a surviving spouse or civil partner, similar to the standard nil-rate band. This means a couple could effectively benefit from up to £5m of relief between them on qualifying APR/BPR assets.

• Instalment and share changes
  The Government is extending the option to pay IHT in up to 10 interest-free annual instalments for all qualifying APR/BPR assets. Also, certain business shares (including those on recognised markets classed as ‘not listed’) will be limited to 50% relief rather than 100%.

What This Means in Practical Terms

• More predictability and planning scope: The £2.5m allowance gives families and business owners a clearer basis for succession planning, especially where assets are close to the thresholds.

• Relief still generous for most estates: For estates below the £2.5m threshold, qualifying assets remain fully exempt from IHT. Estates above that figure will still benefit from relief up to the allowance and 50% relief thereafter, mitigating cash tax bills.

• Transfers between spouses boost total relief: For married couples or civil partners, the transferability of unused allowance can significantly increase the relief available on death.

Take-Away for Clients

If you own significant agricultural or business assets:

1. Assess the value of qualifying property against the £2.5m relief cap.
2. Consider how the 50% relief above that level affects your overall IHT position.
3. Review wills and succession plans to make full use of transferability between spouses/civil partners.
4. Think about lifetime gifting in light of the refreshed rules.

By engaging with these reforms early, clients can better secure their estates and plan for smooth generational transitions under the updated APR/BPR regime.