The government has announced major changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) that came into force on 6 April 2026. These reliefs have long been essential tools for reducing inheritance tax on farms and rural businesses, but the rules have tightened, and families will need to plan carefully to avoid missing out on reliefs.

What’s changing and why does it matter?

Revisiting the £1 million cap

In the October 2024 Budget, the government announced a £1 million cap on the value of agricultural or business assets that could qualify for 100% inheritance tax relief, to apply from April 2026. Anything above that level received only 50% relief, an effective inheritance tax rate of 20%.

The cap was also per person and was not transferable which added further complexity and restrictions on farming businesses.

The introduction of the cap doesn’t change if assets qualify for 100% relief, these rules remain unchanged. Assets that would only receive 50% relief will still be entitled to the same level of relief.

This was the first time APR and BPR had been restricted in this way, and it prompted many farming families to seriously evaluate the effect these restrictions would have on their future and conduct a hard review of how their land and business interests were owned.

Revision made: transferable and the cap rises to £2.5 million

The government were heavily criticised by the farming community as many farms faced inheritance tax bills for the first time. In response to mounting pressure, the government changed the rules to make the cap transferable between spouses, meaning that married couples could benefit from a combined £2m limit for 100% APR and BPR.

Then, on 23 December 2025, a further decision was made to increase the cap to £2.5m per person, a total of £5m when the transferable element was accounted for. The excess over the cap can still receive relief, albeit at a maximum of 50%.

For many farming families, this will make a significant difference, but it also highlights an important issue.

Marriage Matters for APR/BPR

Whilst the new £2.5 million allowance is now transferable between spouses and civil partners, unmarried partners cannot share or transfer the allowance, and each partner is limited to their own £2.5 million cap.

This can create a large tax gap between couples who are married and those who are not, especially where:

  • the farm is owned by one partner
  • the couple live together but have no formal legal status
  • the value of the farm exceeds the allowance

Without planning, an unmarried partner may face a substantial inheritance tax bill, which could put pressure on the future of the farm.

The Modern Farming Family

Modern farming families look very different to those from previous generations, with both partners often actively involved in running the business and fewer couples choosing to marry.

Farming families are increasingly choosing to pass farming assets down a generation, or two, particularly where the cap is exceeded. This brings with it concerns about making sure the assets remain in the family, particularly with a view to potential divorce.

Gifting down a generation: pre‑nups and post‑nups

To give some protection that gifts won’t be lost in a potential divorce, there are steps that can be taken to protect assets as much as possible. Family members that are already married can look at post-nuptial agreements to exclude a claim on gifted farm or business assets. If they aren’t married, a pre-nuptial agreement can be put in place to protect assets one spouse owns prior to marriage.

These agreements can be vital where farming assets, inherited land or multi‑generational businesses are involved and specialist advice is essential.

Trusts

In certain circumstances, gifting to individuals may not be desirable and a trust may be an option. Trusts can be helpful to remove assets from your estate but while still allowing a degree of control as a trustee, or simply to give more protection.

Farming partnership agreements

It may be necessary to update or put in place a partnership agreement to ensure that all parties are represented correctly for APR and BPR relief. This may include adding additional family members if gifts are made to them or adding trustees if a trust is used.

What families should be thinking about now

Every family’s situation is different, and the right approach will depend on the structure and value of the farm. A good place to start would be to acquire updated valuations of the land and assets to understand potential tax liabilities. Taking advice early can help protect the farm, the family and the next generation. Reviewing wills and partnership agreements should also be considered.

The variation in tax policy signalled a shock change to inheritance tax that was unexpected. It is important that farmers and business owners consider their positions to determine if changes need to be made.

These changes highlight the importance of reviewing your succession and inheritance tax planning sooner rather than later. Our Private Client specialists can help you understand how the new £2.5 million cap may affect your circumstances and the steps you can take to protect your farm or business.

Call 01245 228125 or email privateclientenq@gepp.co.uk to arrange a confidential discussion.