There have been lots of changes Agricultural Relief (formally Agricultural Property Relief) and Business Relief (formally Business Property Relief) since our last article in November 2024. After many months of consultation, significant reforms to Agricultural Relief (AR) and Business Relief (BR) took effect from 6 April 2026.
AR and BR have long provided up to 100% relief from Inheritance Tax (IHT) on qualifying agricultural and business assets, helping families pass farms and businesses down generations without major tax burdens. These changes represent one of the biggest changes to AR and BR in decades, introducing new caps and reduced relief rates that mean many farming families and business owners who previously expected full relief now face higher IHT bills.
It is not surprising that many people will have lost sight as to what the current rules are – these major changes first announced in the Autumn Budget on 30 October 2024 initially included a reduction to the limits to just £1 million per individual, and the allowance would not be transferrable between Spouses/Civil Partners. The Government then announced in the Autumn Budget on 26 November 2025 that any unused part of the allowance would in fact be transferable between Spouses and Civil Partners. And then, finally, a further announcement on 23 December 2025 confirmed that the reduction to the limits would actually increase to £2.5 million per individual. However, the law was not actually passed until 18 March 2026, shortly before being enacted less than 3 weeks later.
So what are the changes?
From 6 April 2026:
- The 100% AR/BR rate will apply only to the first £2.5 million of combined qualifying assets.
- Any value above £2.5 million will qualify for only 50% relief. This essentially means that the values will be subject to IHT at 20%.
- The allowance will be index‑linked from 2031 based on CPI.
- Spouses and Civil Partners can combine allowances (up to £5 million) through transfers of unused relief.
Other notable changes include:
- Shares listed on the AIM market will now only receive 50% BR, and can not be covered by the £2.5 million allowance. Essentially, this means that the values of any shares will be subject to IHT at 20%.
- The option to pay IHT in 10 annual interest‑free instalments will be extended to all assets qualifying for AR or BR.
What should affected individuals/Trustees be doing?
- Check whether (and to what extent) your assets still qualify for the reliefs under the new rules.
- Conduct a current Estate planning exercise, including review of your Will and existing succession arrangements.
- Revisit Trust structures and asset ownership of land, buildings, and business assets.
- Consider whether lifetime transfers or restructuring could reduce future liabilities, especially for high‑value Estates.
- Seek professional advice to ensure you understand the impact of the new rules.
