Relief capped: What the new APR and BPR rules mean for you

Agricultural Property Relief (APR) and Business Property Relief (BPR) have historically allowed relief of up to 100% on the value of assets to which it could apply. That position has now changed fundamentally and under the Finance Act 2026, the new rules took effect on 6 April 2026.

What has changed?

A new £2.5 million cap on full relief. Full 100% relief under both APR and BPR is now limited to £2.5 million of qualifying agricultural and business property per individual. Any value above that threshold continues to attract relief, but at the reduced rate of 50% — meaning that the excess is effectively subject to IHT at 20% on death and 10% on lifetime transfers into trust.

Transferability between spouses and civil partners. Any portion of the £2.5 million allowance that is unused can be passed to a surviving spouse or civil partner, in the same way as the standard nil-rate band. This means that a married couple or civil partnership may jointly have up to £5 million of qualifying assets from IHT at the point of the survivor's death — in addition to the benefit of other available allowances such as the nil-rate band. 

Trusts. Relevant property trusts which held qualifying property before 30 October 2024 benefit from their own standalone £2.5 million allowance. However, where a settlor has created more than one trust after 30 October 2024, a single £2.5 million allowance is shared across those trusts. 

Payment by instalments. Where IHT is now payable on APR or BPR property, it may be paid in 10 equal, interest-free annual instalments. 

What should you be considering?

Wills and estate planning. All wills involving agricultural or business property should be reviewed. Some wills contain standard clauses directing qualifying assets to children rather than to the surviving spouse — provisions which may now produce unintended tax charges under the new rules. Given that unused allowances can now be transferred between spouses, it is no longer necessary to ensure the allowance is deployed in full on the first death..

Lifetime gifts. Outright gifts of qualifying assets remain a tax-efficient option. Capital gains tax can be deferred on a gift of business or agricultural property, with the recipient inheriting the transferor's base cost. Provided the donor survives for seven years, no IHT will arise on the transfer. One countervailing factor to weigh is the CGT uplift that occurs when assets pass on death rather than by gift — a consideration of particular significance where assets have accrued substantial latent gains.

Existing trusts. It may be sensible to transfer qualifying assets out of trust ahead of the next trust anniversary. In many cases, inheritance tax and capital gains tax can be mitigated through available reliefs.

New trusts. While new trusts will be subject to the new IHT rules (10-year charges and exit charges), trustees will have certainty about when those IHT charges will fall (at least every 10 years), rather than having to plan for a more significant liability on death.

Valuations. Obtaining up-to-date professional valuations of all relevant assets is now particularly important. Particular care is needed in identifying any non-agricultural or development value in land, and in assessing the character and use of farmhouses and farm buildings.

Funding future liabilities. Thought should be given now to how any IHT liability that may arise will be met. Options include the instalment regime described above, life insurance policies (particularly those placed in trust), and the identification of assets that could be realised to generate liquidity if required.