Case Studies
Estate Planning in the Era of Reformed IHT Reliefs: Agricultural & Business Property Relief Caps
Major caps and transferability introduced for Agricultural and Business Property Reliefs—learn how to protect family farms and business assets under new IHT rules.
By NomadicTax Research Team • 5-8 min read • February 22, 2026
## Key Reforms from 6 April 2026
The UK government is reforming **Inheritance Tax (IHT)** reliefs for agricultural property and business property:
- **100% relief cap:** On combined agricultural and business property where **100% relief** will be limited to **£1 million per individual**. Over that amount, relief drops to 50%. ([gov.uk](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai))
- **Transferability between spouses/civil partners:** Unused portions of this relief can be transferred to a surviving spouse, combining to £2 million total relief for couples. ([gov.uk](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai))
- **Changes to AIM shares:** Relief on shares in Alternative Investment Market companies will be reduced—relief drops from 100% to 50%. ([accountingweb.co.uk](https://www.accountingweb.co.uk/tax/personal-tax/capital-gains-tax-reliefs-reduced-in-budget?utm_source=openai))
## Who Is Affected Most
- Owners of **family farms** or businesses whose value exceed the individual £1 million cap.
- Property-rich estates, business owners with livestock, farms, or trading companies.
- Investors and shareholders with AIM holdings looking for relief on inheritance.
## Strategic Tips for Estate Planning
- **Use inter-spousal transfers**: If part of the BPR/APR relief is unused at first death, transferring unused relief can yield up to **£2 million** combined relief for couples. ([lgtwm.com](https://www.lgtwm.com/uk-en/insights/market-views/autumn-budget-2025-317054?utm_source=openai))
- **Gift assets prior to April 2026**: Transferring parts of agricultural or business property before reforms apply could preserve relief.
- **Consider AIM shares sooner**: Relief rate cuts for AIM investments make timing critical for inter-generational transfers.
- **Budget for the 50% relief beyond £1 million**: Estates exceeding that cap will now face IHT on half the property value above £1 million—so plan the liquidity accordingly.
## Example Illustration
Let’s say Alice owns a farm valued at **£1.5 million**. Under the new rules:
- First £1,000,000 receives **100% relief** → £0 IHT payable.
- Remaining £500,000 only gets **50% relief**, so £250,000 enters the IHT chargeable estate.
- If Alice is married, her unused relief portion (if any) transfers to her husband, allowing the couple to shield more jointly.([gov.uk](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai))
If she held shares in an AIM company worth £200,000,
- Previously, that may have been 100% relief;
- Now only **50% relief** applies → increasing IHT exposure significantly.([accountingweb.co.uk](https://www.accountingweb.co.uk/tax/personal-tax/capital-gains-tax-reliefs-reduced-in-budget?utm_source=openai))
## High-Level Action Plan
- Get valuations of your business/farm/AIM assets now—knowing whether you’ll exceed the new £1 million cap.
- Consider structuring gifts/transfers before 6 April 2026 to preserve full relief under current rules.
- Keep detailed records of ownership, role, and eligibility conditions.
- Engage estate and tax planning legal professionals familiar with IHT, especially for cross-generational planning.