From 6 April 2026, Business Property Relief (BPR) and Agricultural Property Relief (APR), the inheritance tax reliefs that have historically allowed qualifying business and agricultural assets to pass on death free of IHT, with no upper limit, are capped at a combined £2.5 million per person for 100% relief. Above that, relief drops to 50%, meaning inheritance tax is effectively charged at 20% on the excess. The cap is transferable between spouses and civil partners, allowing couples to shelter up to £5 million. This is the most significant change to IHT planning for farming families and business owners in a generation.
There is a sentence I’ve heard in several variations over the past eighteen months, from farming families and business owners alike. The wording changes, but the shape of the anxiety is always the same.
“We’ve spent forty years building this, and now we might have to sell part of it to pay the tax when we die.”
The fear is real. Whether it is proportionate depends, as it always does, on the numbers, and the numbers have shifted significantly since the original announcement in October 2024.
What actually changed, and the journey to get here
The story of this reform matters, because the final position is materially different from what was first announced.
In the Autumn Budget 2024, the Government announced that 100% APR and BPR would be capped at the first £1 million of combined qualifying assets. The reaction, particularly from farming communities, was intense.
In the Autumn Budget 2025, the Government confirmed that the £1 million allowance would be transferable between spouses and civil partners. A welcome concession, but the core cap remained.
Then, on 23 December 2025, the Government announced a significant revision: the cap would increase from £1 million to £2.5 million per person. This change, legislated in the Finance Act 2026, took effect on 6 April 2026.
The practical position is now:
The first £2.5 million of combined APR/BPR-qualifying assets per person receives 100% relief, no inheritance tax. Above that threshold, relief is 50%, meaning an effective IHT rate of 20% on the excess, rather than the standard 40%. The allowance is transferable between spouses and civil partners, so a couple can shelter up to £5 million at the 100% rate. When combined with existing nil-rate bands (£325,000 each) and residence nil-rate band allowances (up to £175,000 each), a married couple could potentially pass on qualifying assets worth up to approximately £6 million before any inheritance tax is due.
HMRC estimates that approximately 1,100 estates will pay more tax as a result of these reforms, and the Government has stated that around 85% of estates claiming APR in 2026/27 are forecast to pay no more than they would have under the old rules.
Why “most farms won’t be affected” is misleading
The Government’s framing, that the majority of estates won’t pay more, is technically accurate but practically misleading for three reasons.
First, not everything on a farm qualifies for APR. Agricultural Property Relief applies to the agricultural value of land and buildings used for agricultural purposes. A farmhouse may qualify, but only if it is of a character appropriate to the agricultural land. Diversified income, holiday lets, farm shops, event venues, renewable energy installations, may not qualify. The farmhouse value and diversified assets sit outside APR, and if they don’t qualify for BPR either, they’re exposed to full 40% IHT.
Second, land values have risen sharply. Agricultural land in England averaged approximately £9,500 per acre in 2024, according to Savills’ farmland market data, significantly higher in productive arable areas. A 500-acre working farm at £10,000 per acre has a land value alone of £5 million before buildings, machinery, or the farmhouse. For many mid-sized family farms, the £2.5 million cap per person, generous as it is compared to the original £1 million, does not cover the full estate.
Third, the interaction between APR and BPR is complex. Where a farming business operates through a partnership or company, both reliefs may apply to different elements of the estate. The combined cap means that business value and agricultural value compete for the same £2.5 million allowance. A farming family with a trading company alongside agricultural land may find the cap binds more tightly than expected.
What’s different about AIM shares
A separate but related change affects investors who held shares listed on the Alternative Investment Market (AIM) specifically for BPR purposes, a common IHT planning strategy.
From 6 April 2026, AIM-listed shares qualify for only 50% BPR, regardless of value. This is not subject to the £2.5 million cap; it applies from the first pound. The effective IHT rate on AIM holdings is now 20% on death.
For anyone whose estate plan relied on AIM portfolios sitting outside IHT entirely, this is a fundamental change. The strategy still offers a benefit compared to full 40% IHT, but the advantage has halved overnight.
The instalment option: a meaningful concession
Recognising the liquidity challenge these reforms create, particularly for farming families whose wealth is land, not cash, the Government has extended the option to pay IHT on qualifying APR and BPR assets in ten annual interest-free instalments.
This applies to all assets qualifying for the reliefs, not just those above the cap. A £500,000 IHT liability spread over ten years at £50,000 per year is materially more manageable than a single demand, particularly where the farm or business itself needs to fund the payment.
The interest-free status, however, applies only if payments are kept on schedule. A missed instalment can trigger the full outstanding balance becoming payable.
The will review is not optional
This is the single most important practical step, and it is the one most likely to be overlooked.
Many wills for farming families and business owners contain standard clauses directing that “all property qualifying for APR/BPR passes to the children, with the remainder to the surviving spouse.” Under the old rules, this worked well, the qualifying assets passed tax-free to the next generation, and the non-qualifying assets went to the spouse under the spousal exemption.
Under the new rules, this clause can produce an unexpected tax charge. If the qualifying assets exceed the deceased’s £2.5 million allowance, the excess passes to the children at 20% IHT, and the unused spousal exemption on those assets is wasted. Saffery, the professional services firm specialising in landed estates and rural businesses, have flagged this specifically in their guidance on the April 2026 reforms: wills containing standard APR/BPR clauses should be reviewed to ensure the £2.5 million allowance of the first to die is not wasted.
This is not a theoretical risk. It is a drafting issue that will produce real tax charges for families who don’t act.
What to actually do
For farming families and business owners with qualifying assets above, or approaching, the £2.5 million threshold, there are several things worth doing in the next twelve months.
Review the estate valuation. Know the current value of qualifying APR and BPR assets, and understand which assets qualify and which don’t. This is the foundation of everything else.
Review the will. Ensure the will is compatible with the new £2.5 million allowance and the transferability rules. Standard APR/BPR clauses may need redrafting.
Consider the spousal transfer. With the allowance now transferable, wills that previously directed assets to trusts to “bank” the first spouse’s relief may no longer be necessary, though trusts remain useful for other reasons.
Model the instalment option. If there will be an IHT liability, understand what the ten-year instalment plan looks like in practice and whether the estate or business can fund it.
Review AIM holdings. If AIM shares were held specifically for BPR purposes, the halving of the relief fundamentally changes the risk-return profile. This is worth modelling.
Don’t rush into lifetime gifting without advice. Gifts of qualifying assets made on or after 30 October 2024 are subject to transitional rules, if the donor dies on or after 6 April 2026 and within seven years of the gift, the £2.5 million cap applies retrospectively. Gifting can still be effective, but the interaction with the cap needs careful modelling.
Get the right team. This is not a single-adviser problem. It requires a financial planner, a tax adviser, and a solicitor working together, particularly where farming partnerships, company structures, or trusts are involved.
Summary
The £2.5 million cap is significantly more generous than the £1 million originally proposed. For many smaller farms and businesses, it means no additional IHT at all. That is worth acknowledging.
For larger estates, and for families whose assets sit at the boundaries where qualification, valuation, and ownership structure interact, the planning implications are real and worth addressing now, while there is time to act thoughtfully rather than reactively.
The anxiety that opened this piece, “we might have to sell part of it to pay the tax”, is not the inevitable outcome. But avoiding it requires a plan, not a hope.
Start the succession conversation
If you’re a farming family or business owner whose qualifying assets approach or exceed the £2.5 million threshold, we’d be glad to talk through what the numbers look like in your specific circumstances.
Frequently asked questions
What is the BPR/APR cap from April 2026? From 6 April 2026, 100% Business Property Relief (BPR) and Agricultural Property Relief (APR) is capped at a combined £2.5 million per person. Above that threshold, relief drops to 50%, meaning inheritance tax is effectively charged at 20% on the excess rather than the full 40%. The cap is transferable between spouses and civil partners, allowing couples to shelter up to £5 million of qualifying assets.
How many estates are affected by the BPR/APR cap? HMRC estimates that approximately 1,100 estates will pay more tax as a result of the reforms. The Government has stated that around 85% of estates claiming APR in 2026/27 are forecast to pay no more inheritance tax than they would have under the old rules. However, for larger farming estates and business owners with significant qualifying assets, the impact is real.
Do AIM shares still qualify for Business Property Relief? From 6 April 2026, shares listed on the Alternative Investment Market (AIM) qualify for only 50% BPR, down from the previous 100%. This applies from the first pound of value and is not subject to the £2.5 million cap. The effective IHT rate on AIM holdings is now 20% on death.
Should I update my will because of the BPR/APR changes? In many cases, yes. Wills containing standard clauses that direct all APR/BPR-qualifying assets to children (with the remainder to a surviving spouse) may produce unexpected tax charges under the new rules. Saffery, in their guidance on the April 2026 reforms, have specifically recommended that wills containing standard APR/BPR clauses be reviewed to ensure the £2.5 million allowance of the first to die is not wasted.
Can I pay the IHT in instalments? Yes. From April 2026, the option to pay IHT on qualifying APR and BPR assets in ten annual interest-free instalments has been extended to all assets qualifying for these reliefs. This is designed to address the liquidity challenge facing farming families and business owners whose wealth is in land or business assets rather than cash.
Tax rules, rates, and allowances referenced in this article are based on the position from 6 April 2026 and may change in future. Inheritance tax planning depends on individual circumstances, asset values, family structure, and the interaction between multiple reliefs. This article is for general information only and does not constitute personal advice, legal
