Inheritance Tax Changes for Farming and Business Families: What April 2026 Means

Do farming and business families now have to pay inheritance tax?

1From 6 April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) are capped at £2.5 million per person (£5 million per couple)
2Assets above the cap now attract a 20% effective IHT rate (50% relief on a 40% tax = 20%)
3AIM-listed shares also shift from 100% to 50% relief from 6 April 2026
4Estates affected can pay the IHT on qualifying assets in 10 annual interest-free instalments
5If you're an executor of a farming or business-owning estate, you may owe more IHT than initially expected

Yes — for the first time in decades, many farming and business-owning families face inheritance tax bills they never expected to pay. From 6 April 2026, the 100% inheritance tax relief that protected agricultural land and business assets is capped at £2.5 million per person. Assets above that cap are taxed at an effective rate of 20%. For executors of affected estates, understanding these changes is urgent.

What changed on 6 April 2026?

Before 6 April 2026, qualifying agricultural property (farmland, farm buildings, certain farmhouses) and business assets (shares in unlisted companies, business premises) could be passed on completely free of inheritance tax. This was known as 100% Agricultural Property Relief (APR) and 100% Business Property Relief (BPR).

From 6 April 2026, this full relief only applies to the first £2.5 million of combined APR and BPR assets per person. Above this threshold, assets receive 50% relief rather than 100%.

The result is an effective IHT rate of 20% on qualifying assets above the cap: the estate pays 40% tax on 50% of the value above £2.5 million. This is lower than the standard 40% IHT rate, but for farms and businesses that have always been fully exempt, it represents an entirely new tax liability.

The £2.5 million cap — how it works

The £2.5 million cap applies to the combined value of APR and BPR assets — it is not separate limits for agricultural and business property. Couples can use both their allowances, giving a combined cap of £5 million across both deaths.

APR/BPR asset value	Relief available	Effective IHT rate
First £2.5m (per person)	100% — no IHT	0%
Above £2.5m	50% relief	20% (40% on 50% of excess)

Note that the standard nil-rate band (£325,000) and residence nil-rate band (£175,000) still apply to non-APR/BPR assets. The £2.5 million cap is an additional allowance specifically for qualifying agricultural and business property.

AIM shares and the 50% relief change

AIM-listed shares — shares traded on the Alternative Investment Market — previously qualified for 100% BPR if held for more than 2 years. From 6 April 2026, they receive only 50% relief.

This is a significant change for investors who held AIM shares specifically for the inheritance tax benefit. The effective IHT rate on AIM shares held at death is now 20% (40% on 50% of the value), rather than 0%.

For guidance on AIM shares specifically, see our AIM shares and BPR 2026 guide.

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The 10-year instalment option — avoiding a forced sale

One of the most important provisions for farming and business families is the instalment option. IHT on qualifying APR and BPR assets can be paid in 10 equal annual instalments, interest-free.

This means:

A family farm that owes £300,000 in IHT (see the worked example below) can pay £30,000 per year over 10 years, rather than £300,000 upfront
The farm does not need to be sold to meet the IHT bill — the estate can continue farming and pay the IHT from income or over time
The instalments are genuinely interest-free on qualifying APR/BPR assets — unlike the standard IHT instalment option, which charges interest

However, if the farm or business is sold before all instalments are paid, the outstanding IHT becomes due immediately.

What executors of farming and business estates should do now

Obtain a professional valuation of all qualifying assets. This must be carried out by a suitably qualified specialist — agricultural property requires an RICS-registered agricultural surveyor; business assets may require a business valuer or accountant.
Calculate whether the estate exceeds the £2.5 million cap. This requires identifying all APR and BPR assets and their values, and checking whether any existing relief claims carry over.
Understand the instalment option before agreeing to pay in full. If the estate cannot immediately meet the IHT bill, the instalment option is available for qualifying assets — it must be elected at the time of the IHT return.
Take specialist professional advice. The transition rules are complex, legal challenges are ongoing, and the interaction with other reliefs (nil-rate band, RNRB) requires careful calculation. A specialist agricultural or probate solicitor is strongly advisable.

Worked example

A family farm is valued at £4 million at the date of death. The deceased had no other qualifying APR/BPR assets. The estate also includes the farmhouse (included in the agricultural valuation) and £100,000 in savings.

APR/BPR cap: £2.5 million — full 100% relief on first £2.5m
Excess: £1.5 million — receives 50% relief
IHT on excess: £1.5m × 50% × 40% = £300,000
Payable over 10 years: £30,000 per year

The savings of £100,000 are assessed separately against the standard nil-rate band. If the nil-rate band is available, no additional IHT would be owed on the savings. If the deceased had already used the nil-rate band in other ways, IHT would apply to the savings at 40%.

Important note on legal challenges

These changes have been deeply controversial and there are active legal challenges from farming organisations and business groups. Executors dealing with affected estates should take professional advice — the situation may evolve.

For the full context on IHT reliefs and how they interact, see our UK inheritance tax guide 2026/27 and our guides on farm inheritance tax and APR changes April 2026. Farra helps executors stay on top of every obligation — get started here.