The government has announced changes to APR and BPR from April 2026.
Currently, certain assets qualifying for APR can get inheritance tax relief at 100% of their agricultural value and certain assets qualifying for BPR can achieve inheritance tax relief at 100% of their market value. This has been a significant and valued relief by our farming and estate clients, as well as non-agricultural business clients.
From April 2026, the 100% relief will be capped to the first £1 million of combined agricultural and business property. This is in addition to the existing nil rate bands and exemptions. However, thereafter the rate of relief will be reduced from 100% to 50%.
Any of the £1 million allowance that is not used will not be transferable to the surviving spouse or civil partner and therefore presents an opportunity for careful succession and Will planning to maximise relief claims.
The £1 million allowance will be apportioned in the ratio of agricultural to business property.
Trusts in existence prior to 30 October 2024 will also be entitled to a £1 million allowance. Multiple trusts set up by a settlor on or after 30 October 2024 are likely to have to share this allowance, but detailed guidance on this will be provided in due course.
This £1 million allowance will affect outright gifts or gifts into trust made in the seven years before death. Gifts made before 30th October will attract relief at the 100% rates whereas gifts made on or after 30 October will be subject to the £1 million allowance and 50% rates.
There is no change to the ‘seven year’ rule therefore transfers to individuals more than seven years before death will continue to fall outside the scope of inheritance tax. This will likely present opportunities for owners of farming or other business to pass down assets to the next generation or into trust sooner rather than later. The use of a corporate vehicle may also be appropriate. Professional advice should be sought before transfers are made to ensure there is no gift with reservation of benefit and that the Capital Gains Tax, Stamp Duty Land Tax and other possible tax consequences of any transfers are
considered. We are not yet aware of any changes that may affect the ability to claim holdover or rollover relief on gift of assets.
Where the rate of relief for agricultural property or business property is at 50%, this rate will not be affected by the new allowance.
The government confirmed earlier in the year that APR will apply to land managed under an environmental agreement – such as land in a Biodiversity Net Gain scheme.
The changes to APR and BPR will be significant for many farming and business owners. Ellacotts can help guide you through the impact of these changes and help provide solutions, together with your legal and other professional advisors, to structure your business in an inheritance tax friendly manner.
If you would like more information or any advice on this article, then please contact us by emailing solutions@ellacotts.co.uk or call us on 01295 250401.
Information for readers: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.
