Changes to inheritance tax announced in the recent Budget have caused concern among farmers and business owners across the UK. So, what exactly is changing, and what could this mean for you?

What are agricultural and business property relief?
Agricultural Property Relief (APR) is an inheritance tax relief designed to reduce the amount of tax payable when farmland is passed down to the next generation. Currently, APR has no financial limit, meaning farmland can be inherited without incurring inheritance tax, regardless of its value.

Similarly, Business Property Relief (BPR) applies to business assets included in an individual’s estate. Like APR, BPR currently has no financial cap on the relief.

Both APR and BPR have been crucial in enabling families to pass on agricultural and business assets without the burden of inheritance tax.

What changed in the Budget?
The Autumn Budget introduced a new £1 million limit for 100% relief under APR and BPR. After the £1 million threshold, the relief will reduce to 50% on the value that exceeds this amount.

It’s important to note that the £1 million allowance is combined for both APR and BPR purposes. If an estate includes both qualifying business and agricultural assets, the single £1 million allowance will apply to the total value.

Additionally, shares that are “not listed” on recognised stock exchanges (such as those on the AIM market) will only qualify for 50% relief, regardless of whether they would normally qualify for APR or BPR.

When will the changes take effect?
These changes are set to take effect from 6 April 2026. Therefore, the new rules won’t be immediate, giving you time to plan or transfer assets to minimise your inheritance tax exposure before the new limits come into force.

If I have agricultural assets valued at more than £1 million, will I have to pay inheritance tax?
Not necessarily. Inheritance tax is calculated by first applying any available reliefs (like APR and BPR), followed by deductions for any applicable allowances. Each individual currently has a nil rate allowance of £325,000, with an additional residence nil-rate band of £175,000.

What should I do now?
If your estate may be subject to inheritance tax, now is a good time to consider strategies to reduce your exposure. Start by assessing the current value and composition of your estate.

If you need assistance with this, or if you would like to explore estate planning strategies, please get in touch with us. We’d be happy to help you navigate these changes!