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From April 2026, Agricultural Property Relief and Business Property Relief are capped at £1 million combined for 100% IHT relief. Above £1m, you get 50% relief (20% effective tax rate). Deaths before April 2026 use current unlimited 100% relief rules.
These changes were announced in the October 2024 Budget and confirmed in the November 2026 Budget. From 6 April 2026, only the first £1 million of qualifying agricultural and business property will receive 100% relief from inheritance tax. The government estimates 75% of claims will be unaffected, but farming groups dispute this figure.
Agricultural Property Relief (APR) reduces or eliminates inheritance tax on agricultural property when someone dies. It applies to:
To qualify for APR, the property must:
Business Property Relief (BPR) reduces inheritance tax on business assets. For farms, BPR often applies alongside APR to cover:
From 6 April 2026:
Farm estate value: £2.5 million qualifying for APR/BPR
| Component | Current Rules | From April 2026 |
|---|---|---|
| First £1 million | 100% relief = £0 IHT | 100% relief = £0 IHT |
| Remaining £1.5 million | 100% relief = £0 IHT | 50% relief = £750k taxable |
| IHT at 40% on taxable amount | £0 | £300,000 |
The standard nil-rate band (£325,000) and residence nil-rate band (£175,000 if passing the home to descendants) still apply. A married farming couple could potentially have up to £3 million of their estate free from IHT when combining all allowances.
The government claims approximately 27% of estates claiming APR will be affected by the changes, with around 520 estates paying more IHT in 2026/27 than they would have under current rules.
The National Farmers' Union disputes these figures. Their analysis suggests:
Government figures include all APR claims, many of which are for small parcels of agricultural land owned by non-farmers. When focused on actual working family farms, the proportion affected is significantly higher than government estimates suggest.
The Chancellor announced that the £1 million APR/BPR allowance will be transferable between spouses and civil partners. This means:
The £1 million threshold will be increased in line with CPI inflation from April 2030. This prevents the allowance from being eroded by inflation over time.
IHT on agricultural and business property can be paid in 10 equal annual instalments, interest-free. This is designed to prevent forced sales of farms to pay the tax bill.
If your loved one died before 6 April 2026, the current rules apply:
For deaths occurring on or after 6 April 2026, executors should:
Farmhouses can qualify for APR, but only if the occupier is actively farming the land. HMRC applies the "character appropriate" test - the farmhouse must be appropriate to the farming operation in size and nature. Large or modernised farmhouses are frequently challenged.
Agricultural land let to tenant farmers can qualify for APR at either 100% or 50% depending on the tenancy type:
Some families are considering gifting farmland during their lifetime. However:
Farm estates are among the most complex to administer for inheritance tax purposes. We strongly recommend engaging a solicitor or accountant with specialist agricultural experience, particularly for estates that may exceed the £1 million threshold. Find advisers through The Law Society or ICAEW.
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