Major Changes Ahead for Inheritance Tax Reliefs: What Business Owners and Farmers Need to Know

• Posted onNovember 24, 2025

For decades, two generous inheritance tax (IHT) reliefs – Business Property Relief (BPR) and Agricultural Property Relief (APR) – have been cornerstones of succession planning for families running businesses and farms. These reliefs have allowed qualifying assets to be passed down to the next generation with little or no IHT liability, ensuring that family enterprises could continue without the burden of a large tax bill. But from 6 April 2026, this landscape will change dramatically.

What is changing?

Under the new rules, the government will introduce a joint £1 million cap on the amount of assets that can qualify for 100% IHT relief under BPR and APR. Above that threshold, the rate of relief will fall, meaning a greater proportion of value will be exposed to tax. The reforms are expected to bring in around £500 million per year by the end of the decade – a sign of just how valuable these reliefs have been for business owners and farmers across the UK.

For many families, these changes will make a real difference to how they plan the transfer of their assets. Take, for example, a farming family with land, livestock, and machinery valued at £3 million. Under the current rules, provided the farm qualifies for APR and BPR, the entire estate could be passed on free of inheritance tax. After April 2026, however, only the first £1 million of value will attract full relief. The remaining £2 million could face a reduced level of relief – perhaps only 50% – leaving a significant tax liability where none existed before.

Similarly, consider a family business owner who has built up a trading company valued at £2.5 million. Right now, if the company meets the qualifying conditions for BPR, its shares can be transferred during lifetime or on death with no inheritance tax to pay. Once the new rules are in force, the full relief would only apply up to the £1 million limit. The excess value would be taxed in part, reducing what the next generation receives and potentially forcing the sale of assets to cover the liability.

In the 2025 Budget it was announced that any unused relief can be transferred between spouses, as is the case with the nil rate band and the residence nil rate band.

What if I give away assets before I die?

Lifetime gifts are also affected. At present, an individual can gift qualifying business or agricultural assets during their lifetime and, provided the conditions are met and the donor survives for seven years, those gifts fall outside their estate for IHT purposes. The 2026 reforms mean that while gifting will still be possible, the same cap and reduced relief rates will apply. A business owner gifting shares worth £1.5 million to their children next year, for instance, would benefit from the full 100% relief. But if that same transfer is made after April 2026, only £1 million would qualify for full exemption, with the remainder attracting a lower rate of relief and potential tax exposure.

Plan now to save later

The knock-on effect of these rules will be felt across estate and succession planning decisions. Families who have relied on the assumption that their business or farm can be  passed on free of tax may now find that they need to rethink ownership structures, consider earlier transfers, or explore funding options to meet future liabilities. For some, it may also make sense to revisit how different parts of their estate – business, property, investments, and personal assets – fit together from a tax perspective.

Meaningful planning takes time. Business valuations, restructuring, and professional advice all require careful coordination. Acting now gives families the flexibility to take advantage of the current, more generous reliefs while they remain available.

There is still time to maximise the current benefit of these reliefs. Now is the time to review your estate and succession plans – to make sure the value you’ve built over a lifetime can continue to support your family and your enterprise into the future. Make an appointment with a member of our experienced Private Client Team, who manage Wills, Trusts, Probate and Estate Planning. Either complete the enquiry form on this page or call us on 01453 847200.

 

Disclaimer: The content of this website blog is for general awareness and insight. This is not legal or professional advice and readers should not act upon the information provided, they should seek professional advice based on their own particular circumstances. The law may have changed since this article was published.