Background
As part of the UK Budget 2025, reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) will become effective from 6 April 2026. These changes tighten the reliefs and introduce new limits and conditions. (gov.uk)
Key Highlights of the Reform
| Feature | Current rules | From 6 April 2026 onwards |
|---|---|---|
| Combined relief cap for APR & BPR | No combined cap | £1 million per individual. (gov.uk) |
| Relief beyond the cap | Full relief regardless of value | Assets above £1 million only get 50% relief, effectively facing a higher IHT rate. (surreyhillstax.co.uk) |
| Shares in AIM / unlisted companies | Full relief under BPR | Only 50% relief will apply. (taxscape.deloitte.com) |
| Spousal transfers | Not always available for all reliefs | Unused allowance will be transferable between spouses or civil partners. (gov.uk) |
| Relief refresh period | Standard lifetime / trust periods | Relief allowances refresh every seven years for lifetime gifts and ten years for trusts under new rules. (surreyhillstax.co.uk) |
Practical Planning Strategies ⚙️
1. Prioritise Lifetime Gifting Gifting assets before 6 April 2026 lets you utilise current APR/BPR at 100% relief. For trust-related transfers, ensuring gifts fall within the new refresh period may maintain relief status.
2. Review Your Portfolio If you hold shares via AIM or unquoted companies with high value, assess whether you're better to dispose, restructure, or “bed and breakfast” those assets before reform takes full effect. The 50% relief post-cap means full exposure to IHT beyond £1 million.
3. Leverage Spousal Transfers Where one spouse has unused relief, transferring assets before death could help maximise the full £1 million allowance. Draft wills and trusts now to reflect the departure from current rules.
4. Use Trusts Strategically Since the relief refreshes every ten years for trusts, ensure that any trust structures are set up in advance of 6 April 2026 so that relief intervals align with the old rules if possible. Going forward, manage lifetime gifts and death estate planning with these refresh periods in mind.
5. Consider Liquidity Needs Because more IHT may be payable at death, especially on land and farms, heirs may need to sell assets or farm businesses to fund IHT. Early structuring can help minimise forced sales.
Example Scenario
Jane owns a small farm with agricultural land valued at £1.5 million, and also holds shares in an unquoted business for £800,000. Under current rules, her family could benefit from 100% APR and full BPR on both. Under the new rules:
- Only £1 million across APR+BPR will be relieved at 100%.
- The farm land above £1 million (£500,000) will face 50% relief, so effectively an IHT rate of 20%, instead of 0%. Unquoted shares get 50% relief too.
- If Jane is married, and her spouse hasn’t used relief, they may transfer available relief between them.
Actionable Next Steps
- Valuation: Get up-to-date professional valuations of agricultural land, unquoted business shares, and other BPR-reliant assets.
- Will and Trust Review: Update deeds and wills, consider lifetime transactions and optimal joint relief allocations.
- Gifting Experts: Consult with tax advisers to explore whether gifting before April 2026 is beneficial and safe.
- Cash Flow Modelling: For estates likely near or over £1 million, run cashflow scenarios to ensure heirs can meet increased IHT liabilities without distress.
Final Word
The reforms will fundamentally change how landowners and family business owners plan for inheritance. If you act before 6 April 2026, you can make full use of the existing reliefs. After that, the landscapes shifts—limits, partial reliefs and tighter rules mean earlier planning isn’t just an advantage, it may be essential.