What’s Changed with Inheritance Tax Rules for Business and Farm Owners?

New rules for inheritance tax were introduced in April 2026. The new rules will particularly affect business and farm owners. If you fall into either of these categories, it’s well worth making sure that you understand the changes and how they may impact you in the future. 

The main changes in this area relate to Agricultural Property Relief (APR) and Business Property Relief (BPR). 

Changes to Agricultural Property Relief and Business Property Relief

Historically, APR has offered 100% relief on any inheritance tax that may be due on agricultural property or land. It covers any land or property that is used for growing crops, rearing animals or is under an environmental land management agreement. (You can read more about which types of agricultural property is eligible here.) 

Equally, BPR offered 100% relief on any inheritance tax that may be due on property that was a business, an interest in a business or shares in an unlisted company.

In recent years, the government have sought to put a combined cap on APR and BPR. Originally, this was set to be £1 million, but after listening to concerns from the farming and business communities, the government increased the value of the proposed cap to £2.5 million. 

This £2.5 million cap has now come into effect. The threshold is per estate and is a combined allowance to cover both agricultural and business property. It’s important to understand that each estate gets only one allowance to cover both APR and BPR: it does not get a £2.5 million tax free allowance for APR and another £2.5 million for BPR.

However, just like other inheritance tax allowances, the cap is fully transferable between spouses. This effectively means that couples who are married or in a civil partnership could have a shared APR and BPR allowance of up to £5 million. 

Any business or agricultural property valued under the cap will still receive 100% relief on inheritance tax. Any business or agricultural property that is valued over and above the cap will now be subject to 50% tax relief.

How many people will this affect?

The government predict that only a small number of business and agricultural property owners will actually be subject to the new 50% tax relief rate. Overall, figures predict that up to 1,100 estates will pay more inheritance tax in the coming tax year as a result of these reforms, which is only a small proportion of the estates that are administered in the UK each year. 

This means that the vast majority of business and agricultural property owners will be unaffected by these changes, and won’t pay any more inheritance tax on their estates than they would have done under the previous rules. 

What about other changes?

In addition to the introduction of the APR and BPR threshold, a number of other changes to inheritance tax law came into force in April 2026. 

Firstly, there have been changes to AIM shares relief. Previously – as with APR and BPR – AIM shares were subject to a 100% inheritance tax relief. This relief has now been halved: AIM shareholders of all sizes will now benefit from a 50% relief. 

It’s also well worth noting that there has been a continuation of the inheritance nil-rate tax band and residence nil-rate tax band freeze. The thresholds of £325,000 for the nil-rate band and £175,000 for the residence nil-rate band will stay as they are until at least April 2031. 

You may also have heard about a change to how unspent pension pots are treated in regards to inheritance tax. This change is still expected to be introduced, but not until April 2027. 

What to do if you think your estate may be affected by the changes

If you’re concerned about how changes to Agricultural Property Relief, Business Property Relief or AIM shares relief could affect your estate, there’s no better time than now to take steps to investigate.

Our solicitors have a great deal of experience in estate planning, and they’ll be able to walk you through what the practical impact of the new changes could be on your estate, as well as anything you might be able to do to manage that impact. 

Please do get in touch if you’d like to know more about how we can advise you on inheritance tax and estate planning. 

FAQs

How have Agricultural Property Relief and Business Property Relief changed?

As of April 2026, there is now a cap on the size of estates that are able to benefit from the 100% inheritance tax relief on agricultural and business property. The business and agricultural property belonging to an estate is now subject to a combined £2.5 million threshold. Anything above this threshold will now only benefit from a 50% tax relief.

Will you be affected by the April 2026 inheritance tax changes?

The changes to inheritance tax that came into force in April 2026 are expected to only affect a small proportion of estates in the UK. Your estate may be subject to the new rates if you own business or agricultural property worth a combined total of more than £2.5 million. You are unlikely to be affected if the value of your business and agricultural assets is beneath this threshold.

Is there now a £1 million Agricultural and Business Property Relief cap?

When the government first announced that they would be introducing a cap on Agricultural and Business Property Relief, the value for that cap was initially going to be £1 million. However, after listening to concerns from the farming and business communities, the government reconsidered and the cap that was introduced in April 2026 was £2.5 million, not £1 million. As the allowance is transferable between spouses and civil partners, many combined estates will actually benefit from an allowance of £5 million. 

What do the April 2026 inheritance tax changes mean for AIM share portfolios?

Prior to April 2026, AIM shares were subject to a 100% inheritance tax relief, regardless of the size of the share portfolio. This has now changed, and AIM shares are now subject to only a 50% relief. This is the case no matter how large or small the value of the shares.