Inheritance tax changes: what farmers and business owners need to know
If you own a farm, agricultural land or a family business, you may already be aware that inheritance tax (IHT) rules are expected to change from April 2026. While this announcement has caused understandable concern, the key message is clear: there is no need to panic, but it is important not to ignore the changes.
From April, significant reforms are expected to take effect to agricultural property relief (APR) and business property relief (BPR). These reliefs have long been central to succession planning for farming families and business owners, helping assets pass to the next generation without triggering large inheritance tax liabilities.
Importantly, these changes are not yet law. They are confirmed government proposals, currently set out in draft legislation and being introduced through the Finance Bill 2025-26, which is making its way through Parliament. However, understanding what could change, and reviewing your plans in good time, can help preserve choice, flexibility and peace of mind.
What are APR and BPR?
APR and BPR are inheritance tax reliefs that can reduce, or in some cases eliminate, the IHT payable on qualifying agricultural or business assets on death, and on certain lifetime gifts that later become chargeable.
Until these suggested reforms, qualifying assets could often pass 100% free of inheritance tax, regardless of their value.
What are the proposed changes from April 2026?
In the Autumn Budget 2024, the government announced proposed changes which would end unlimited relief under APR and BPR from 6 April 2026, subject to the legislation being passed.
Under the new rules:
- Each individual will have a £2.5 million cap which will apply to the combined value of qualifying assets eligible for 100% APR or BPR
- Any qualifying assets above £2.5 million will receive relief at 50%
- The excess value may therefore be subject to inheritance tax at an effective rate of 20%
- Unused allowances can be transferred between spouses and civil partners, allowing a couple to pass on qualifying assets worth up to £5.65 million tax free (including nil rate bands, if available).
While this represents a softening of earlier proposals, it is still a significant shift in how farming and business assets would be treated for inheritance tax.
Why this matters
For families with land-rich estates or asset-heavy businesses, the end of unlimited relief could result in a significant inheritance tax bill where none was previously expected. Plans that worked well under the old rules may no longer achieve the desired outcome.
It is therefore essential to review asset values, revisit Wills, Trusts and succession plans, and ensure your arrangements still reflect your long-term objectives.
Practical steps to consider now
- Review existing arrangements, such as Wills, Trusts and succession plans
- Think beyond tax and consider family and business priorities
- Ensure figures and valuations are accurate and up to date
- Put safeguards in place, such as Lasting Powers of Attorney
- Have open discussions with family and business partners to avoid disputes later on.
How Attwaters can help
There is still time to act before the new rules are due to take effect, but early advice allows for greater flexibility and control. Working with a specialist solicitor, alongside your financial or tax adviser, can help you plan with confidence.
Our Wills, Trusts and Probate team can help you to understand how the proposed changes may affect your estate, review and update your Wills, Trusts and succession plans, and plan ahead.
For an initial discussion, please contact us at wills@attwaters.co.uk or call 0330 221 8855.
