The latest Autumn Budget (30/10/24) announcements have introduced significant changes to Inheritance Tax (IHT), particularly affecting Business Property Relief (BPR) and Agricultural Property Relief (APR). From 6 April 2026 both APR and BPR will be subject to a combined £1 million limit. This means farmers and business owners face capped reliefs on agricultural and business property and will be subject to an effective 20% inheritance tax rate over the £1 million threshold from 2026.
Key changes
APR currently allows a person to pass on the agricultural value of some property in the UK free of IHT. This includes land or pasture used to grow crops or rear animals and farm buildings where all of the conditions are met.
Assets that may qualify for BPR include: a business or an interest in a business; land, buildings or machinery used in a business; and shares in an unlisted company. Where BPR is available, the value of an asset can be reduced by 50% or 100% when working out the IHT due.
However, at the recent Autumn Budget, it was announced that the government will reform APR and BPR from 6 April 2026. The 100% rate of relief will continue for the first £1m of combined agricultural and business property, falling to 50% thereafter.
The rate of BPR will also fall to 50% in all circumstances for shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM.
Example:
A family farm valued at £6 million, previously transferable tax-free upon the farmer’s death, will now incur a £1,000,000 tax liability.
The reduction in BPR and APR will be acutely felt by business owners during transitions, especially in the circumstances of an unexpected death of the owner or a major shareholder.
This change will also affect assets qualifying for APR and BPR which have previously been placed into trusts for asset protection and family wealth planning.
Reduced reliefs may result in immediate tax liabilities which are payable within 6 months of death or a qualifying chargeable event for a trust, potentially forcing asset sales or diverting funds needed for business operations. This financial strain can be particularly destabilising in rural and farming communities, where significant asset values are tied up in land and infrastructure and therefore difficult to liquidate to provide the funds necessary to pay the IHT.
Plan ahead
With the new Budget announcements, many families will need to rethink their succession planning strategies to maintain their land and operations and, given the impending changes, it is crucial that they take a proactive approach to succession planning. Reviewing asset values and understanding the IHT implications under the new rules is an important first step. This may involve restructuring ownership, exploring trusts, or other tax-efficient vehicles to manage potential liabilities.
Working closely with an accountant can provide tailored strategies that address each business’s unique circumstances. Effective planning, whether through optimised asset allocation, alternative reliefs, or succession structures, is key to minimising the tax impact on business continuity and family legacies.
Contact us
The upcoming changes to IHT represent a significant shift in how business and agricultural assets are taxed upon inheritance. The 2026 implementation date may feel like some time away and the Government is yet to publish its detailed technical advice in respect of this announcement, but the need to take action starts now to preserve financial stability.
Now is the time to engage with experts, secure the right policies, and take the necessary steps to protect your business’s future. Contact Jayne O’Boyle ( jayne.oboyle@pmm.co.uk) or Jonathan Cunningham (jonathan.cunningham@pmm.co.uk) or call 01254 679131 for more information and guidance.
