The UK Government announced on 23 December that the level of the Agricultural and Business Property Relief’s threshold will be increased from £1m to £2.5m when it is introduced in April 2026.
This change also follows the Chancellor’s announcement in the Autumn 2025 Budget that the 100% relief allowance would also now be transferrable between spouses and civil partners. This will allow them to pass on up to £5m of qualifying agricultural and business assets free of Inheritance Tax (IHT), on top of existing nil-rate bands. This is a welcome concession, although taxpayers may still potentially be worse off after 6 April 2026, than under the current rules where there is no cap on the amount of relief.
We have summarised the new rules and how these will affect individuals and trusts below and how we can help ahead of these changes coming into effect.
What does this mean for you?
From 6 April 2026, individuals will only be entitled to 100% agricultural property relief (APR) and business property relief (BPR) on assets worth up to a maximum of £2.5 million. Any value in excess of £2.5 million will qualify for 50% relief, meaning that there is an effective 20% IHT rate on a death, whereas under previous rules these assets would have been fully relieved.
Trusts set up before the Budget each potentially qualify for a maximum allowance, however for trusts set up on or after 30 October 2024, this allowance will be shared between all trusts settled by the same settlor. The rules around how much allowance is available to each trust are nuanced, and in some cases quite complicated, and advice should be taken by trustees of both existing and new trusts to determine how much allowance is available to them.
Similarly to the nil-rate band, the £2.5m will refresh every seven years, meaning individuals can transfer £3.15m of business assets into a trust every seven years, without an immediate charge to IHT.
These present potentially significant IHT issues for individuals, who may not have sufficient liquidity in their estates to settle an IHT liability that previously wouldn’t have arisen.
What should you be doing?
With the new rules likely coming into effect from April 2026, time is ticking and the deadline for planning prior to the new rules is fast approaching.
There are various options available prior to April 2026 to help protect wealth but there is no ‘one size fits all’ approach.
It will be important to review existing wills to ensure these are tax-efficient for APR/BPR as a result of the proposed changes.
Consideration about how any potential tax charges will be funded is more important than ever, given the unexpected impact for individuals who might not have been in this position before.
For trustees, it is important to quantify the amount of available relief to ensure that future needs are met and tax liabilities can be funded.
Now is the perfect time to seek professional advice to review your position and ensure your affairs are structured to achieve your goals.
Learn more and get advice
Get in touch with us to understand how these changes might impact you and your trust.
Please note that this content is not intended to give specific technical advice. It is designed to highlight some of the key issues rather than provide an exhaustive explanation of the topics. Professional advice should always be sought before action is either taken or refrained from as a result of information contained herein.
