The government’s approach to reforming Agricultural Property Relief (APR) and Business Property Relief (BPR) has, once again, been shaped by intense pressure rather than a settled, long-term policy framework. Since the 2024 Budget, the Labour party has faced sustained criticism not only from farmers and their representative bodies, but also from business stakeholders and its own backbench MPs, all of whom raised concerns about the impact of the proposed reforms on family farms and trading businesses.
Against this backdrop, the decision announced today, 23 December, to increase the threshold up to which full APR and BPR applies will come as a welcome, if belated, concession – a bit of an early Christmas present for many family farms and trading businesses. Raising the threshold for 100% APR/BPR claims to £2.5 million per estate will reduce the number of estates exposed to inheritance tax, but it does little to disguise the uncertainty created by a reform process that has unfolded in stages and under intense scrutiny.
While many families will benefit from this change, it does not remove the need for careful succession and estate planning – particularly where asset values continue to rise. The government has softened its position, but the direction of travel remains clear: reliefs are being more tightly targeted and should not be taken for granted. Families and business owners would be well advised to review their plans now, well ahead of the April 2026 implementation date, to avoid being caught out by reforms that continue to prioritise increasing IHT revenue from the larger estates.
What has changed?
From 6 April 2026, the threshold at which 100% APR and BPR applies will increase from £1 million to £2.5 million per estate.
This means:
- Individuals will be able to pass on up to £2.5 million of qualifying agricultural or business assets with full inheritance tax relief.
- 50% relief will continue to apply to qualifying assets above this threshold.
- These reliefs are available in addition to existing inheritance tax allowances, such as the nil-rate band and residence nil-rate band.
What does this mean for couples?
As APR and BPR thresholds are transferable between spouses and civil partners, a surviving spouse or civil partner will be able to pass on up to £5 million of qualifying agricultural and business assets free from inheritance tax, provided the relief has not already been used.
This transferability will also apply to widows and widowers whose spouse or civil partner died before these changes were introduced.
Why has the government made this change?
Following the 2024 Budget, there was significant concern from the farming community and business owners that the proposed reforms could result in increased inheritance tax bills for family-run farms and trading businesses.
The government has stated that raising the threshold is intended to:
- Protect more family farms and businesses from inheritance tax
- Reduce the number of estates affected by the reforms
- Better target relief, while avoiding unlimited relief for the largest estates
Who is likely to be affected?
The revised threshold is expected to significantly reduce the number of estates facing higher inheritance tax liabilities (according to the government):
- The number of estates claiming APR (including those also claiming BPR) affected in 2026/27 is expected to fall from around 375 to 185.
- Around 85% of estates claiming APR, including those also claiming BPR, are forecast to pay no additional inheritance tax as a result of the reforms.
- The number of estates claiming only BPR (excluding AIM shares) affected by the reforms is expected to fall by around a third, reducing complexity for business owners.
What hasn’t changed?
While the threshold has increased, the government remains committed to reforming inheritance tax reliefs more broadly. The underlying principle remains that:
- The most valuable agricultural and business estates should not benefit from unlimited relief
- Qualifying agricultural and business assets will continue to be taxed at a lower effective rate than most other assets
How M+A Partners can help
Our team of tax and succession planning experts can review your estate and business arrangements, helping to ensure you make full use of Agricultural and Business Property Relief. We can provide guidance on succession planning, ownership structures, and any inheritance tax considerations, helping you reduce future liabilities and protect family farms or businesses.
Contact us for personalised advice and support.
