APR and BPR relief allowance increased to £2.5 million: what does it mean for business owners and farmers?

Just two days before Christmas, the UK Government announced an increase in the threshold for 100% relief for APR and BPR of £2.5 million (up from £1 million as first announced on 30 October 2024, see here). As anticipated, qualifying agricultural property and/or business property above this threshold will be subject to half the usual rate of inheritance tax ('IHT') at an effective rate of 20%.  

Combined with the news announced just weeks earlier at the Budget on 26 November 2025 that any unused portion of an individual's allowance can be transferred to the estate of their surviving spouse or civil partner, farmers and business owners may now be able to breathe (somewhat of) a sigh of relief.  Moreover, deaths prior to 6 April 2026 will be able to benefit from the allowance transferability with a deemed full £2.5 million allowance available.

It is now proposed that the £2.5 million amount will be adjusted for inflation from 6 April 2031 (instead of 6 April 2030).

The amended draft legislation to reflect these changes was laid before Parliament on 5 January 2026, leaving very little parliamentary time to debate the Finance Bill before these rules will come into force, anticipated from 6 April 2026.  Otherwise, the anticipated changes to APR and BPR which were first announced on 30 October 2024 broadly remain unchanged. 

The effect of these most recently announced changes are as follows:

• For a married couple or civil partners, up to £5 million of assets qualifying for either relief can be shielded from IHT on the death of the survivor.  This is in addition to the usual allowances, such as the nil rate band (currently £325,000), the unused portion of which can be transferred from an individual's estate to the estate of the surviving spouse or civil partner. 

• Therefore in total, a married couple or civil partners can leave up to £5.65 million on the survivor's death provided 100% qualifying agricultural and/or business property is held.  

• It is not a requirement that both spouses or civil partners jointly own the qualifying agricultural or business property; it can be owned solely by one spouse or civil partner for the allowance to be transferable.  Lifetime transfers between spouses to maximise allowances will therefore no longer be necessary as a planning strategy for farmers and business owners concerned about the impending changes.

• In respect of lifetime gifting, an individual's allowance will apply as anticipated, refreshing every seven years, but at the higher £2.5 million cap.

• As for trusts, the amendments to the draft legislation also increases:

• the maximum lifetime allowance for a settlor to £2.5 million; and
• and the maximum trust allowance to £2.5 million which refreshes every ten years

Next steps

As ever, the rules remain in draft form and they are subject to change.  The advice remains to review existing estate plans and consider how any IHT will be funded (see here).  There remains a short window of opportunity prior to 6 April 2026 for APR and BPR planning with trusts (whether there are pre-existing trusts in place or with a view to settle agricultural or business property on trust for future generations).  

A final recommendation is for those farmers and business owners in a long-term relationship to now seriously consider marriage or civil partnership.

Withers can provide specific advice tailored to your circumstances.