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This guide has not been checked against its sources
We re-checked our most-read guides against GOV.UK and the other official sources in September 2026. This one was not among them, so nobody has confirmed its figures, deadlines or process steps since it was written. Treat it as a starting point and confirm anything that matters on GOV.UK before you act on it.
Since 6 April 2026, Agricultural Property Relief and Business Property Relief give 100% relief only on the first £2.5 million of qualifying property, and 50% above that. The allowance is transferable between spouses and civil partners. This page was originally written before the change; it now sets out what the rules are rather than what to do before a deadline.
This deadline has passed
This page was written as a countdown to 5 April 2026. That date has gone, and the £2.5 million allowance has applied since 6 April 2026. The sections below have been rewritten to describe the rules as they now stand.
Example: Farm Worth £5 Million
Under the rules before 6 April 2026:
Full £5m receives 100% APR relief
Inheritance tax: £0Under the rules from 6 April 2026:
First £2.5m: 100% relief
Next £2.5m: 50% relief (£1.25m taxable)
Inheritance tax: £500,000 (40% of £1.25m)
Farm Owners
Agricultural Property Relief (APR) applies to:
- Agricultural land and buildings
- Farmhouses (if character-appropriate)
- Growing crops and livestock
- Farm cottages for workers
Where qualifying agricultural property is worth more than the available allowance, the excess attracts 50% relief rather than 100%.
Business Owners
Business Property Relief (BPR) applies to:
- Trading companies and shares
- Business assets used in the company
- Unlisted shares (including AIM)
- Partnership interests
Qualifying business property above the available allowance attracts 50% relief, which is an effective IHT rate of 20% on that excess.
AIM Investors
Alternative Investment Market (AIM) shares received 100% BPR after two years' ownership until 5 April 2026. Since 6 April 2026 the rate for shares admitted to trading on a recognised stock exchange but designated "not listed" — which covers AIM — is 50% in all circumstances. Because they never qualify for 100% relief, they do not use up the £2.5 million allowance.
Combined APR and BPR
The £2.5 million allowance is combined across both APR and BPR. Someone who owns both a farm (APR) and a business (BPR) has one £2.5 million allowance between them, not one for each. A separate £2.5 million allowance applies to relievable agricultural and business property held in trusts.
An earlier version of this page told readers that a gift of qualifying property completed before midnight on 5 April 2026 would keep unlimited relief even if the donor died within seven years, and described that as a one-time opportunity. That claim is not supported by anything HMRC has published. The GOV.UK policy paper on the changes sets out how the allowance works "from 6 April 2026" and does not address lifetime transfers made before that date, or how the allowance applies where a donor dies on or after it within seven years of a gift. It has been removed rather than restated.
Anyone who made a lifetime gift of agricultural or business property in the run-up to 5 April 2026 on that understanding will need the position confirmed for their own facts. HMRC's Inheritance Tax helpline can explain how the rules apply, and the estate's own tax adviser can apply them to the gift that was actually made.
What is settled
- The £2.5 million allowance applies to deaths and chargeable events from 6 April 2026, with 50% relief above it
- Unused allowance transfers to a surviving spouse or civil partner and is claimed on form IHT437, submitted with the IHT400. It does not depend on the estates having been restructured beforehand
- A separate £2.5 million allowance applies to relievable property held in trusts
- Shares designated "not listed", including AIM, are at 50% relief in all circumstances
What a lifetime gift involves in any event
- Giving away an asset can trigger capital gains tax on the transfer. Gift Hold-Over Relief can defer the gain to the recipient in some cases
- A donor who continues to benefit from what they gave away — living rent-free in a gifted farmhouse, for instance — has made a gift with reservation, and the property stays in their estate however long ago the gift was made. See our guide to gifts with reservation of benefit
- The recipient generally has to keep holding the asset, and it has to keep qualifying, for relief to be available on a later death
- See our guide to the 7-year gifting rule for how lifetime gifts are treated generally
Farra publishes information, not advice. Inheritance tax, capital gains tax and the reliefs interact, and a specific estate needs someone acting for it. What that costs varies and no official body publishes a benchmark, so no figure is quoted here.
Find a STEP Member (Society of Trust and Estate Practitioners)
STEP members specialise in inheritance tax and estate planning.
Website: www.step.org/find-a-member
HMRC Inheritance Tax Helpline
Phone: 0300 123 1072
Hours: Monday to Friday, 9am to 5pm
Note: HMRC cannot give personalised tax advice but can explain the rules and how they apply generally.
Capital Gains Tax
Giving an asset away during your lifetime can trigger capital gains tax on the transfer. Gift Hold-Over Relief can defer the gain to the recipient in some cases, so that it is charged when they sell rather than when the gift is made.
How the allowance passes between spouses
The unused part of the £2.5 million allowance passes to a surviving spouse or civil partner. It is claimed on form IHT437, "Claim unused allowance for agricultural property or business property relief", submitted with the IHT400 on the second death. It is a claim on the estate, not something that has to be arranged in advance.
Gifts with reservation
Where someone gives an asset away but continues to benefit from it — living rent-free in a gifted farmhouse, for instance — the property is a gift with reservation and stays in their estate, however long ago the gift was made.
Where qualifying assets are worth more than the available allowance:
On a £5 million farm with no other reliefs in play, the first £2.5 million is relieved in full and the remaining £2.5 million attracts 50% relief, leaving £1.25 million taxable and £500,000 of IHT.
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