On 23 December 2025, the Government announced significant revisions to its proposed reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) for inheritance tax (IHT). These changes represent a notable shift from earlier proposals and will be particularly relevant for family businesses and farming enterprises planning for succession.
A More Generous Relief Threshold
From 6 April 2026, the full 100% relief available under APR and BPR will apply to qualifying assets up to a value of £2.5 million per individual. This is a substantial increase from the £1 million threshold proposed earlier in 2025.
As with other IHT allowances, any unused relief can be transferred between spouses and civil partners. This means that, in practice, couples may benefit from up to £5 million of qualifying agricultural or business assets being passed on free from IHT at 100% relief. Assets exceeding this threshold will continue to benefit from 50% relief.
What Has Changed – and What Remains the Same
The Government’s revised position softens the impact of the earlier proposals, reducing the number of estates affected and easing pressure on owner-managed businesses and family farms. The changes will be implemented through amendments to the Finance Bill 2025–26.
Importantly, several aspects of the wider IHT regime remain unchanged:
- The nil rate band (£325,000) and residence nil rate band (£175,000) are frozen until the 2030–31 tax year.
- The residence nil rate band will continue to taper for estates exceeding £2 million.
- These thresholds remain available alongside APR and BPR and can be used in addition to the new £2.5 million relief allowance.
In January 2026, the House of Lords Economic Affairs Committee recommended extending the deadline for paying IHT from six to twelve months after death. While this has not yet been adopted, such a change would provide welcome flexibility for estates facing liquidity challenges.
Other elements of the reform package remain in place, including:
- Extending the option to pay IHT in equal annual instalments over ten years (interest-free) to all APR/BPR-eligible property.
- Reducing BPR from 100% to 50% for certain shares traded on recognised stock exchanges but classified as “not listed.”
- No change to the treatment of AIM shares.
What This Means for Family Businesses
The increase in the 100% relief threshold to £2.5 million per individual represents a meaningful improvement for many family-owned businesses and farms. In many cases, this will mean that a larger proportion—or even the entirety—of qualifying trading assets will fall within the full relief band.
This reduces exposure to IHT at the standard 40% rate and enhances the prospects for efficient intergenerational succession.
However, eligibility for APR and BPR remains highly fact-specific. Relief depends on:
- The nature of the business (it must be genuinely trading rather than primarily investment-based),
- The type of assets held (such as shares in unquoted trading companies), and
- The relevant ownership periods.
Particular attention should be paid to shareholdings in companies admitted to trading on recognised exchanges but designated as “not listed,” as these will only qualify for 50% BPR under the new rules.
Practical Steps to Consider
In light of these developments, business owners and landowners should consider taking the following steps:
- Review estate values against the new £2.5 million threshold (or £5 million for couples) to understand how much will qualify for full relief.
- Update wills to ensure assets pass in a tax-efficient manner and that available reliefs are fully utilised.
- Assess business structures and shareholdings, particularly where “not listed” shares are involved, to determine whether restructuring may be appropriate.
- Plan for liquidity, recognising that some IHT liability may still arise. The extended ten-year instalment option can assist with cash flow management.
- Consider timing, as the new regime applies only to deaths occurring on or after 6 April 2026.
In Summary
The Government’s revised approach provides increased protection from IHT for qualifying agricultural and business assets, with up to £2.5 million per person eligible for 100% relief and 50% relief available beyond that threshold.
While the broader IHT framework remains unchanged, these reforms offer greater flexibility and opportunity for effective succession planning. As ever, the precise outcome will depend on individual circumstances, and tailored professional advice is essential.
If you would like advice on any of the points raised in this article, please do not hesitate to contact our Private Client department today.