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%)
3Shares on markets designated as 'not listed', such as AIM, shifted from 100% to 50% relief on 6 April 2026 — and do not use up the £2.5 million allowance
4Unused allowance transfers to a surviving spouse or civil partner, but only if the personal representatives claim it on form IHT437
5Estates affected can pay the IHT on qualifying assets in 10 annual interest-free instalments
6If 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 allowance applies to the combined value of APR and BPR assets — there are not separate limits for agricultural and business property. Any unused allowance passes to a surviving spouse or civil partner, giving a couple up to £5 million across both deaths. That transfer is not automatic: it must be claimed on HMRC form IHT437, within four years of the survivor's death or six months of the personal representatives taking up their role. Where the first death was before 6 April 2026, the whole £2.5 million allowance is treated as available to transfer.

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%. The 50% rate applies in all circumstances, and these shares do not use up any of the £2.5 million allowance.

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

Gifts made before the change

The new rules reach back beyond the start date. Where a gift of agricultural or business property was made on or after 30 October 2024 and the donor dies on or after 6 April 2026 within seven years of the gift, the £2.5 million allowance and the 50% rate apply to that gift. Gifts made before 30 October 2024 are not affected in this way.

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 administering an affected estate involves

Valuing the qualifying assets. Agricultural property is normally valued by a rural surveyor; business assets by a business valuer or accountant. The agricultural value, which is what the relief covers, has to be separated from any development value.
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.
The instalment option. Where the estate cannot meet the bill at once, tax on qualifying property can be paid by instalments. It is elected when the inheritance tax account is delivered, not later.
Check whether allowance transfers from an earlier death. Unused allowance from a spouse or civil partner who died earlier is claimed on form IHT437 and is not applied automatically.

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%.

How the allowance reached £2.5m

The reform was announced at the Autumn Budget in October 2024 with a £1 million allowance that was not transferable between spouses. It was made transferable at the Budget in November 2025, and the allowance was raised to £2.5 million on 23 December 2025. What took effect on 6 April 2026, under Finance Act 2026, is the £2.5 million transferable allowance — not the figure first announced.

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.