Most people will be familiar with the reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) that were announced in the 2024 budget. These reforms came into effect on 6 April 2026, however, there have been a few changes to what was originally announced – so where are we now?
At the November 2025 budget, the Chancellor announced that the 100% APR / BPR allowance for qualifying assets would be transferable between spouses on death. This was followed in December 2025 by a further announcement to extend the allowance from £1 million to £2.5 million. Together, these announcements can extend the potential value of assets qualifying for 100% relief to £5m per couple. Application of the allowance for individuals and trustees is summarised below:
INDIVIDUALS
- Individuals each have a £2.5 million allowance. This is a combined allowance that applies to both APR and BPR qualifying properties. Where multiple qualifying assets are subject to an Inheritance Tax charge, the allowance is apportioned across all eligible assets.
- The allowance can be used against transfers during lifetime, that give rise to Inheritance Tax charges. This includes both gifts to individuals that become chargeable due to the donor passing away within seven years of making the gift, and most lifetime transfers into trust.
- The allowance refreshes every seven years and is offset against chargeable transfers in chronological order – i.e. against the earliest transfers first.
- The allowance (or unused element thereof) is transferable to a spouse or civil partner on death. The amount available to be transferred is the difference between the full £2.5 million and the amount of the 100% relief band that was actually used. If, therefore, a spouse didn’t use any of their allowance, either because it was all transferred to the surviving spouse, or because they didn’t have any qualifying property, then the full £2.5 million is transferred. Although these new rules only apply from 6 April 2026, the full £2.5 million allowance is available to a surviving individual if their spouse or civil partner died before 6 April 2026.
- Any qualifying property in excess of the available nil rate bands and the 100% APR and BPR allowance will qualify for 50% relief. This means the maximum tax rate that can apply to property qualifying for APR and BPR is 10% for lifetime transfers and 20% in the death estate.
TRUSTEES OF RELEVANT PROPERTY TRUSTS
- Most trusts created during lifetime, and some trusts created on death, are relevant property trusts in which trustees pay up to 6% Inheritance Tax every ten years and on capital distributions from the trust. These charges are reduced by any available reliefs, exemptions and the available nil rate band.
- All trusts set up and holding qualifying assets before 30 October 2024, will each have their own £2.5 million allowance.
- From 30 October 2024, there is a single £2.5 million allowance for multiple trusts set up by the same settlor:
- This will be allocated in chronological order, with priority given to the first settlement.
- If two settlements are made on the same day, then the allowance is split proportionally between the settlements.
- Allocation of the £2.5 million allowance is fixed at the outset. If a trust can no longer use its allocation of the allowance then the unused element cannot be transferred to other trusts and is lost.
- The trust’s available allowance is applied to distributions on a chronological basis, applying to the earliest distributions first. Any remaining allowance can be used on the next ten-year anniversary.
If no allowance remains, a maximum of 50% APR or BPR will apply, resulting in a tax charge of up to 3% of the value of the trust’s assets.
Other points
RESIDENCE NIL RATE BAND (RNRB)
The RNRB is worth up to £175,000 per individual (£350,000 per couple). Broadly, the RNRB reduces the value of the main residence in the death estate, where that home is left to lineal descendants. However, the RNRB tapers away where an estate is valued above £2 million (before APR, BPR or other reliefs). If, therefore, an individual has £2.5 million of APR and BPR property that qualifies for 100% relief, they would not get the RNRB as it would be fully tapered away.
PROPERTY / ASSET VALUATIONS
Historically, due to land, buildings, machinery and stock qualifying for 100% APR or BPR, a professional valuation of these assets hasn’t strictly been necessary with HMRC, generally accepting balance sheet values rather than market values. As a result of the reforms, and consequently, these assets will not necessarily benefit from 100% relief anymore; there will be a need for a full valuation of the farm and business to provide accurate market values of these assets. This should ideally be undertaken as soon as possible after death. Valuations will also be important for trustees of relevant property trusts that hold APR and BPR qualifying property. As noted above, the trustee’s allowance is set by the initial value of assets when they enter the trust, so even if the initial value is well within the available allowance, a valuation will still be necessary to determine the
trustee’s allowance going forward.
Finally
Following the reforms to APR and BPR, it is important to undertake Inheritance Tax planning as early as possible. Succession planning takes time and if you are looking to give assets away, then this needs
to be done with sufficient time to survive seven years for the transfer
to fall out of your estate.
It should also be noted that Inheritance Tax planning should not be considered in isolation as there will inevitably be impacts on other taxes. It is, therefore, essential to talk with your accountant before
any decisions are made.
