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In the 2024 Budget, the Chancellor announced that Agricultural Property Relief (APR) and Business Relief (BR, formerly known as Business Property Relief) would be capped from 6 April 2026. She then said that any IHT due on eligible assets would be reduced to 20%, as opposed to the standard rate of 40%.
Then, in December 2025, she amended her decision – fewer than four months before the legislation is due to come into force.
As it stands, assets eligible for either kind of relief do not normally attract any Inheritance Tax (IHT). In other words, these assets can receive up to 100% IHT relief.
Here’s what you need to know before the new tax year begins.
Agricultural Property Relief and Business Relief can be applied to certain assets on death
APR
Usually, land that qualifies for APR must normally be used for one or several of the following purposes:
- Growing crops
- Grazing, rearing, or breeding livestock
- Short-rotation coppice.
Additional assets that could qualify are:
- The value of the milk quota associated with the land
- Some agricultural shares and securities
- Farm buildings, cottages, and houses.
Assets that don’t qualify are:
- Farm equipment including machinery
- Derelict buildings
- Harvested crops
- Livestock
- Property subject to contract for a sale.
There are several stipulations and conditions to each of these points, as laid out by the government in full. [1]
BR
To qualify for BR, the business owner must have owned the following assets for at least two years before they died.
Assets qualifying for BR include:
- A business or interest in a business
- Shares in an unlisted company.
Certain assets may benefit from 50% relief.
In October 2024, the Chancellor announced that both reliefs would be capped at £1 million
In a contentious move that led to backlash from businesses around the UK, in the 2024 Budget, Rachel Reeves announced that APR and BR would only be applied to the first £1 million in eligible assets. She said this would become law on 6 April 2026.
After asset values cross the threshold, Reeves said that they would benefit from a further 50% IHT relief.
These reliefs are applied on an individual basis and in addition to the existing IHT nil-rate bands valued at up to £500,000. In theory, under these rules, if you were to pass away and leave your entire estate to your spouse or civil partner, they could claim your unused reliefs and leave up to £1.5 million before IHT would be due.
However, in a surprise turn, the Chancellor has since amended her decision and raised the cap to a more generous level.
These reliefs will be capped at £2.5 million as of 6 April 2026
On 23 December 2025, the government announced that it has revised the initial £1 million cap on APR and BR, bringing it up to £2.5 million.
As mentioned in the statement, “Any unused allowance for the 100% rate of APR and BR will be transferable between spouses and civil partners, including if the first death was before 6 April 2026.
“This will allow spouses or civil partners to pass on up to £5 million in qualifying agricultural or business assets between them before paying IHT, on top of existing allowances such as the nil-rate band.” [2]
Remember that traditional gifting exemptions are available to those who hold agricultural and/or business assets. As such, with careful forward planning, some estates may be able to vastly reduce their IHT liabilities through strategic lifetime gifting of assets to the next generation.
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Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning or tax planning. IPS Capital does not provide tax or legal advice.
Sources
[1] [Unknown] Agricultural Relief for Inheritance Tax HMRC
[2] 09.01.2026 Agricultural Property Relief and Business Property Relief changes HMRC
