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Major changes to inheritance tax relief - what it means for business owners and farmers

If your business or farming assets are worth more than £1 million, it’s time to revisit your inheritance tax planning.

In the October 2024 Budget, the government introduced a big shift in how Agricultural Property Relief (APR) and Business Property Relief (BPR) will work – and for many business owners and landowners, it’s a wake-up call.

From 6 April 2026, unlimited relief on APR and BPR will be replaced with a new £1 million lifetime cap at 100% relief, with 50% relief applying thereafter. That means any value above the £1 million threshold could face significant inheritance tax (IHT) charges, both on death and for assets held in trusts.

So, What’s Changing?

Let’s break it down:

  • Previously: If you owned qualifying assets, APR and BPR provided 100% IHT relief – no cap, no problem.
  • Now: That relief is being capped. From April 2026, only the first £1 million gets full relief. Above that, only 50% of the value will be shielded from IHT.
  • The Impact: A £2 million business or farm could now face an IHT bill of up to £200,000 if action isn’t taken.

This Isn’t Just a ‘Farmers Problem’

Yes, agricultural land and businesses are affected. But so are:

  • Family-run trading companies
  • Business premises
  • Land and property held in trust
  • Investments that qualify for BPR

Whether your wealth sits in bricks, land or business shares, if it’s been relying on BPR or APR – this could affect you.

What About Married Couples?

Here’s a crucial detail: the new £1 million APR/BPR allowance is not transferable between spouses. Unlike the nil-rate band, there’s no pass-it-on benefit here.

That means if your will leaves everything to your spouse, and they then pass everything to your children or other beneficiaries later, you could lose half the available relief. Instead, simply structuring your will so that qualifying assets are passed to your beneficiaries on the first death could save as much as £200,000.

Trusts Are Also Affected

Historically, putting qualifying assets into trust was a go-to strategy. But now:

  • Trusts set up before 30 October 2024 will each get their own £1m allowance.
  • Trusts set up after 30 October 2024 by the same settlor will share a single £1m cap.

Similarly, transfers into trust after 6th April 2026 will only have the £1m allowance to utilise against the chargeable transfer – transfers into trust before this date remain uncapped.

The change creates a challenge for trustees – particularly when high-value assets are involved and there’s limited liquidity to pay IHT. In some cases, this might force the sale of key assets just to meet the 10-year IHT charge.

Lifetime Gifts May Now Be More Attractive

Here’s the good news. Gifting qualifying assets during your lifetime (PETs) may be a more tax-efficient route under the new regime.

If you gift assets and survive for seven years, there’s no IHT to pay – even on values above £1 million. Taper relief kicks in after year three, and if the assets are trading assets, there may also be capital gains tax holdover relief available under TCGA S165.

What Should You Be Doing Now?

If you’ve got assets that qualify for APR or BPR worth more than £1 million, don’t wait until 2026 to act. Now’s the time to:

  • Review your will and estate structure.
  • Assess your trusts and how they’re set up.
  • Model potential IHT liabilities under the new regime.
  • Consider lifetime gifts as part of a broader succession plan.

At Fortus, we don’t just do the numbers – we help you build the right strategy.

We’re already working with clients across the UK to prepare for these changes, and we’d love to do the same for you. Our tax  and wealth experts work together to craft a plan that’s bespoke to your family, your business, and your long-term goals. Call us today on 01904 558 300, or email us on enquiries@fortus.co.uk.