Changes to Agricultural Property Relief (APR) and Business Property Relief (BPR)

Autumn Budget 2024

From April 2026, the first £1m of combined business and agricultural assets will continue to attract no Inheritance Tax (IHT), but for assets over £1m IHT will apply with 50% relief, at an effective rate of 20%, the Chancellor confirmed. The Country Land and Business Association (CLA) see this as potentially effecting 70,000 farms.

The most significant change to IHT proposed in the Autumn Budget 2024, is a reform of Agricultural Property Relief (APR) and Business Property Relief (BPR) from April 2026. Currently qualifying assets can attract relief up to 100% of their value from IHT with no overall cap on how much relief can be claimed.

It is proposed that the relief will continue only for the first £1 million of combined agricultural and business property, with a reduced rate of 50% relief thereafter.

Furthermore, a reduced 50% relief will also apply for shares designated as ‘not listed’ on the markets of recognised stock exchanges, such as the AIM market from April 2026.

What is changing?

From 6 April 2026, a new limit of £1 million will apply per taxpayer for the combined value of property qualifying for 100% BPR and 100% APR.

Where the qualifying conditions are met, the current rate of 100% will continue to be available on the value covered by this allowance, but any excess value will be limited to relief at 50%.

This allowance will not be transferable between spouses.
It will be allocated against property qualifying for 100% relief only – so assets that only qualify for 50% relief under the normal rules will not count towards the £1 million limit.
The allowance will apply to property in the estate at death together with taxable gifts made in the 7 years prior to death.
Where multiple assets qualify for 100% relief, the allowance will be allocated proportionately based on value.
The allowance also applies to lifetime transfers which trigger an immediate IHT charge, such as gifts onto a trust.

Trustees of certain trusts are subject to IHT periodically and are able to claim both APR and BPR. From April 2026 these trustees will also have a £1 million limit. Whilst existing trusts are expected to receive a £1 million limit per trust, rules will be introduced to ensure the limit is divided by the number of trusts set up on or after 30 October 2024.

APR is also being extended to include environmental land management within its scope from April 2025, where land is managed under an environmental agreement with the UK government or other government departments and bodies. This was seen as a key development in incentivising activities which support the UK’s climate targets.

We expect more details on this change to be available in early 2025.

What are the changes likely to mean for those affected?

The changes will have a significant impact on the IHT payable by most estates where the value of qualifying assets is more than £1 million. The Chancellor also confirmed to freeze the main and residence nil-rate band to 2030 rather than 2028.

We expect to see a rush of landowners and farmers to review their assets and consider succession plans between now and April 2026. For some, making these plans now and resolving to give away assets during their lifetime to the next generation may be more appealing than it has been previously, although it can lead to more capital gains tax being paid by their beneficiaries when the assets are ultimately sold.

What should I do now?

Whilst we await the specific details, we would advise our clients to review their assets and speak to an expert to see if any action should be taken. Price Bailey’s experts are positioned to discuss your unique situation and advise accordingly on individual matters such as giving away assets now, and/or changing your Will, or even changing your asset base. There will be no single answer that is right for everyone. Most IHT planning involves a 7-year window until it is fully effective – meaning the sooner our clients act, the better.

Equally, our comprehensive IHT frequently asked questions guide may assist you.

Historic commentary

Inheritance Tax (IHT) is a tax on the estate of someone who has died and includes their property, money and possessions. The total amount of tax collected from IHT has been growing steadily since 2010 and is currently collecting a record amount for the UK Government.

Whilst there has been speculation that the tax would be abolished this does not seem likely and instead, we may see changes over the coming years aimed at increasing the amount of tax collected or focusing it on certain types of estates.

Recent commentary and speculation about changes to IHT have focused on three important IHT reliefs, being:

Agricultural property relief (APR),
Business property relief (BPR),
The exemption from IHT for most pension savings.

In this article, we outline what any changes could mean and the things to think about if your estate may be impacted.

Both APR and BPR are important and valuable reliefs which can exempt (in whole or in part) the value of qualifying assets from a charge to IHT. As the name suggests, APR is given to assets used for the purposes of agriculture. In our article here we provide details on BPR and what assets this can apply to.

Each of these reliefs are currently uncapped, and recent speculation has suggested that a future change might be to introduce a cap on the maximum amount of asset value that each relief can be claimed against. Some commentary has suggested a cap of £500,000 would meet various objectives, and at this level, the number of estates due to pay IHT would dramatically increase.

It has also been suggested that BPR should no longer be available for holding shares listed on the Alternative Investment Market (AIM), and that pension pots should be included in the taxable estate when someone dies.

HMRC recently released a consultation about the future of IHT and the outcome of this, and the General Election 2024 will ultimately determine what the future of IHT will look like. Once we have further details of any changes we will update this article accordingly.

What can I do now?

It is difficult to know what changes will be made to IHT in the future. In comparison to other taxes, the legislation has been relatively unchanged for 40 years.

If you think your estate will be subject to IHT when you pass away then the first immediate step is to take advice on how the tax will apply to you. There will be a number of options available to reduce the impact of IHT, both during your lifetime and by making provisions in your Will.

If your estate is reliant on APR or BPR then it may be worth considering if any further steps should be taken now. For example, if a cap on relief is ultimately introduced then would it be prudent to make sensible lifetime gifts of qualifying assets, either directly to your intended beneficiaries or onto a trust for their benefit. This type of action is not without consequences and so detailed advice should be taken before you proceed.

Many farming and business owners will have assets earmarked for the next generation and may be comfortable making that gift now to take advantage of the existing rules and protect their family from any changes in the future. Such a gift has a number of other consequences, such as a loss of income from that asset and other tax implications, capital gains tax in particular.

If you would like to discuss your estate and the potential impact of any future changes then please speak to us today. Price Bailey’s IHT advisors are available to discuss your unique situation and advise accordingly. Equally, our comprehensive IHT frequently asked questions guide may assist you.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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