For decades, Business Property Relief (BPR) and Agricultural Property Relief (APR) have been essential tools that enable UK families to pass on farms and businesses without incurring a substantial Inheritance Tax (IHT) bill. These reliefs help to prevent the forced sale of assets and ensure that family businesses remain operational from one generation to the next.
However, starting April 6, 2026, major Inheritance Tax changes are coming. Following the 2024 Autumn Budget, the UK government confirmed through draft legislation released on Legislation Day (21 July 2025) that both APR and BPR will be fundamentally restructured under the Finance Bill 2025–26.
These 2026 inheritance tax changes are significant and could affect thousands of estates across the UK.
So, what are the inheritance tax changes from April 2026?
1. £1 Million Cap on 100% Relief
From 6 April 2026, only the first £1 million of combined qualifying business and agricultural property will receive 100% IHT relief. Any value above this £1 million threshold will receive 50% relief.
For example,
if a £3 million farm is passed on after April 2026, £1 million of that will be completely exempt from IHT, while the remaining £2 million will receive 50% relief resulting in a £400,000 tax bill.
Note: This £1 million allowance applies per individual, not per estate.
2. Allowance Cannot Be Transferred Between Spouses
Unlike the Nil-rate band (NRB) the £1 million APR/BPR allowance cannot be transferred between spouses or civil partners. Each person has their own cap, and unused allowance is lost when one spouse passes away.
For example,
A £2 million business passed to a spouse at death is tax-free. But when the surviving spouse later passes it on to children, only their £1 million allowance applies. The remaining £1 million is receives 50% relief, resulting in a tax liability of £200,000.
3. Alternative Investment Market (AIM) Shares Will Lose 100% Relief
From 6 April 2026, shares listed on the AIM will no longer qualify for 100% BPR. Instead, AIM shares will receive only 50% relief, regardless of whether their value falls within the £1 million allowance. This means that even the first £1 million of AIM shares will be eligible for just 50% relief, unlike other qualifying business or agricultural property, which continues to receive 100% relief on the first £1 million.
And How do the New Rules Apply to Trusts?
The government has issued a consultation focusing on how the new £1 million allowance on APR and BPR applies to trusts.
- What are 10-year charges and exit charges on trusts?
Trustees may have to pay an inheritance tax charge of up to 6% on the value of the property in the trust every 10 years. There is also a tax charge when property is transferred out of the trust, known as an exit charge. - Can APR and BPR apply to trusts?
Yes, both APR and BPR can apply to property held in trusts. - How does the £1 million allowance work for trusts?
HMRC proposes a combined £1 million allowance for trustees on the value of qualifying property that gets 100% relief. This allowance applies to each 10-year charge and each exit charge. - What happens if a settlor creates multiple trusts before 30 October 2024?
Each trust will get its own separate £1 million allowance for 100% relief on qualifying business or agricultural property. - What if a settlor creates multiple trusts on or after 30 October 2024?
The £1 million allowance will be shared across all trusts created by that settlor after this date, rather than each trust having its own full allowance.
Who will be affected the most?
Despite government claims that only a small number of estates will pay more tax, the impact could be much broader:
- Farmers: Rising land prices mean even modest farms may exceed the £1 million threshold.
- Business owners: Especially those using AIM shares for tax-efficient planning.
- Trust Settlors: People creating or holding trusts may lose access to full relief if not properly structured.
Transitional Rules: Key Dates and Tax Implications Before and After April 2026
1. What happens to Business Property Relief (BPR) and Agricultural Property Relief (APR) if both transfer and death occur before 30 October 2024?
In this case, there is no inheritance tax change. BPR and APR continue to provide 100% relief without any cap.
2. What if the transfer happens before 30 October 2024 but death occurs before 6 April 2026?
The current rules remain unchanged. The 100% relief on qualifying property still applies fully and uncapped.
3. How are BPR and APR affected if the transfer is made after 30 October 2024, but death happens before 6 April 2026?
Even in this scenario, the existing reliefs remain in place. The 100% relief continues to apply without any cap.
4. When do the new capped relief rules come into effect?
The new rules apply only if the transfer occurs on or after 30 October 2024 and the donor dies on or after 6 April 2026.
For example,
If you gift a £2 million farm to your child in January 2025 and if you pass away in May 2026, only £1 million qualifies for 100% relief. The other £1 million is eligible for 50% relief, triggering a £200,000 tax bill.
Therefore, lifetime gifts made now may still be taxed under the new rules, unless the donor survives the full seven years after the changes take effect.
5. How does the new relief framework work after 30 October 2024 and 6 April 2026?
Under the new rules, the first £1 million of qualifying business property still receives 100% relief. Any value above £1 million will be eligible for 50% relief only.
But Is There Any Good News with the Inheritance Tax Changes?
Yes, there are a few positive changes that could help some families and landowners.
More Land Will Qualify for APR
Starting 6 April 2025, the scope of APR will be increased to land managed under an environmental agreement with, or on behalf of, the UK government, devolved governments, public bodies, local authorities, or approved responsible bodies.
Instalment Option to pay IHT Continues
The 10-year interest-free payment option for IHT remains for qualifying APR and BPR assets, which helps families avoid selling land or business assets to pay tax.
Spouse Exemption Still Applies
Assets passed to a spouse or civil partner remain are completely exempt from IHT, however the £1 million APR/BPR cap will take effect upon the death of the surviving spouse.
For example,
If John leaves his business property worth £2 million to his wife, Mary, when he dies. Because of the spouse exemption, Mary doesn’t pay any IHT on this; she receives the full £2 million tax-free.
Later, when Mary passes away, the new rules apply. The first £1 million of that business property will receive 100% relief from IHT, but the remaining £1 million will only qualify for 50% relief due to the cap. This means the estate will face some IHT on the value above £1 million at Mary’s death.
Act Now! Time Is Running Out to Protect Your Estate from Rising Inheritance Tax!
With less than a year before the new rules come into force, urgent action is needed to safeguard your estate from larger Inheritance Tax bills. Start by getting accurate valuations of your land, business, and investments to understand how they fit within the £1 million relief cap.
If you are married, ensure both you and your partner fully utilise this relief. It’s crucial to review your trusts and will now to keep them tax-efficient and up to date. Be especially careful with lifetime gifts made after 30 October 2024, and explore whether using your land for approved environmental schemes could provide additional benefits.
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