Navigating the 2026 Inheritance Tax reforms: what UK farmers and business owners need to know

Key changes effective from 6 April 2026

• 1. Introduction of a £1 Million Cap on 100% Relief
  Currently, qualifying agricultural and business assets can receive up to 100% relief from Inheritance Tax (IHT). Under the new rules, this full relief will be limited to the first £1 million of combined APR and BPR per estate. Any value exceeding this threshold will qualify for only 50% relief. For example, an estate with £2 million in qualifying assets would receive 100% relief on the first £1 million and 50% relief on the remaining £1 million, potentially resulting in a £200,000 IHT liability.
• 2. Reduction of BPR for Unlisted Shares
  Shares not listed on recognised stock exchanges, such as those on the Alternative Investment Market (AIM), will see BPR reduced from 100% to 50%, regardless of the total value.
• 3. Application to Trusts
  Trusts will also be subject to the £1 million cap on 100% relief for APR and BPR. This allowance will apply to each ten-year anniversary charge and exit charge. For trusts established before 30 October 2024, each will have its own £1 million allowance.
• 4. Extension of APR to Environmental Land
  From 6 April 2025, APR will be extended to include land managed under environmental agreements with government bodies or approved organisations. This change recognises the role of environmental stewardship in agriculture.

Implications for farmers and business owners

The government estimates that around 2,000 estates annually will be affected by these reforms, with approximately 500 claiming APR and 1,000 holding unlisted shares. While this suggests that the majority will remain unaffected, the impact on those with larger estates could be substantial.

Critics argue that the £1 million cap may not adequately protect family farms and businesses, many of which exceed this value due to rising land and asset prices. The National Farmers’ Union has expressed concerns that the changes could force families to sell parts of their farms to meet tax liabilities, threatening the viability of long-standing agricultural enterprises.

Additionally, the reduction in BPR for unlisted shares may discourage investment in private companies and affect succession planning for family-owned businesses.

Conclusion

The forthcoming reforms to APR and BPR represent a significant shift in the inheritance tax landscape for agricultural and business property owners. These changes necessitate proactive planning to ensure the continued viability of family farms and businesses. Engaging with professional advisors now can help navigate these complexities and safeguard assets for future generations.