In a quite unexpected move, the UK Government has today announced a softening of its proposed reform of Agricultural Property Relief (APR) and Business Property Relief (BPR).
Under the initial proposals, from 6 April 2026, APR and BPR were to be restricted with each individual (and certain trusts) having a £1 million allowance for assets which currently qualify for relief at 100%, so that no IHT would be payable on that £1 million.
That proposed £1 million allowance will now be increased to £2.5 million – a significant and welcome uplift. In addition, as announced in the Autumn Budget on 26 November 2025, the allowance will now be transferable between spouses and civil partners, meaning that couples will now be able to leave APR and BPR property with a combined value of £5 million free of IHT on death.
Above the initial £2.5 million (or £5 million for couples), the rate of APR and BPR will still be halved to 50% meaning that an effective rate of IHT of 20% will apply above that level.
The Treasury have confirmed that the changes will be introduced to the Finance Bill in January and will apply from 6 April 2026.
This is undoubtedly a very welcome (and some would say long overdue) change to the proposals. It follows months of lobbying by bodies such as the CLA and the NFU, who have strongly argued that the changes would have have a profound and hugely damaging impact on rural businesses. The proposed changes have been widely criticised for misunderstanding what it takes to run and manage a viable farming business given the challenges facing rural businesses and the already huge strains put on profitability and cashflow. The CLA have long said that many farms faced “being taxed out of existence” by the new tax rules.
Therefore, this announcement will undoubtedly offer some relief to the rural and business owning community. It is good news, but many will say that the “watering down” of the proposals do not go quite far enough. Many businesses will still face a significant (additional) tax burden which stands to have a profound effect on their future viability.
In light of the forthcoming changes, many farms and estates have been considering and, in many cases, accelerating their succession plans. We are expecting this to continue into the New Year and beyond – effective planning for farms and businesses remains essential as the full force of these changes begin to be felt from 6 April 2026. Whilst the change isn’t going to be quite as bad as feared, change is still coming.
