Agricultural Property Relief changes from April 2026: what the £2.5 million allowance means for family farms

7th Jan 2026

Author: Butcher & Barlow

A reprieve for family farms after the Autumn Budget proposals: From 6 April 2026, 100% APR/BPR is proposed to apply up to £2.5 million per person, with 50% relief above that. Unused allowance can transfer to a spouse or civil partner

The government announced in the Autumn Budget 2024 that it planned to change the Inheritance Tax reliefs that many working farms rely on. Just before Christmas 2025, it said it had reconsidered the likely impact on farmers.

In the Autumn Budget 2024 the government announced plans to reform Agricultural Property Relief (APR) and Business Property Relief (BPR) from 6 April 2026.

The key proposal was a new cap:100% APR/BPR would apply to the first £1 million of qualifying agricultural and business assets, with 50% relief above that.

In the Autumn Budget 2025 many farmers hoped the £1 million figure would be increased. It was not. Instead, the government confirmed that any unused part of the £1 million allowance would be transferable between spouses and civil partners, including where the first death occurred before 6 April 2026.

Then, on 23 December 2025, the government announced a major change: the proposed £1 million allowance for 100% APR/BPR will increase to £2.5 million, from 6 April 2026. The allowance will still be transferable between spouses and civil partners remains.

For many working farms, that is a major reprieve. However, it is still important to understand what is changing, and what practical steps you can take now.

The NFU has said APR encourages investment because relief depends on land staying in farming use. It also hopes this could support the next generation, for example by making it easier for land to be let to young farmers. Larger landowners and businesses may still pay more Inheritance Tax than under the old rules.

APR and BPR changes from 6 April 2026

Under the revised proposals, from 6 April 2026:

• £2.5 million per person of qualifying APR/BPR assets can receive 100% relief (so no Inheritance Tax on that part providing assets qualify for relief).
• Above £2.5 million, qualifying assets will receive 50% relief. With a standard Inheritance Tax rate of 40%, 50% relief means an effective tax charge of 20% on the value of assets above the allowance, that still qualify for APR/BPR.
• The option to pay Inheritance Tax on eligible APR/BPR property by equal annual instalments over 10 years, interest-free is expected to be extended to all property eligible for APR or BPR.

This allowance is shared across assets that qualify for 100% APR and 100% BPR, so if your estate includes both, they draw on the same £2.5 million. In other words, APR and BPR sit in the same “pot”.

What does this mean for a couple?

Because the allowance is intended to be transferable between spouses and civil partners, a couple can potentially have £5 million of qualifying APR/BPR assets at 100% relief (subject to the detailed rules).

On top of APR/BPR, there are other allowances that may also apply:

• The standard Nil-Rate Band is £325,000 per person.
• The Residence Nil-Rate Band is £175,000 per person, but it reduces once an Estate is over £2 million (it tapers by £1 for every £2 over £2 million).
  If the first death between spouses or civil partners is before 6 April 2026, the proposals assume the full allowance can still be transferred to the survivor. This is intended to be fairer for widows and widowers and reduces complexity.

The government has said that, as a result of the December 2025 change, around 85% of Estates claiming APR in 2026 to 2027 are forecast to pay no more Inheritance Tax because of these reforms.

That said, every farm is different. The outcome depends on what qualifies for APR/BPR, how assets are owned, whether there are valuable non-farm assets and what your Will says.

APR/BPR changes: gifts made since 30 October 2024

The government has also set out transitional rules that can affect some families. In simple terms, if you have made certain gifts of qualifying property on or after 30 October 2024, and you die on or after 6 April 2026 within 7 years of the gift, the gift can affect how much allowance is available.

This does not mean you should never make gifts. It does mean you should take advice before making big changes, especially where land, buildings, shares, or Partnership interests are involved.

What should working farmers do now?

Even with a higher allowance, it is wise not to assume everything is taken care of. In our experience, inheritance tax issues are often caused by paperwork and ownership issues rather than the headline rules.

A sensible starting point is:

1. Confirm Farm Ownership
   Make sure you know what is owned personally, jointly, through a Partnership, or in a Limited Company. This affects what happens on death and how smoothly the Farm keeps trading. Where appropriate, consider whether key assets should be in the joint names of spouses or civil partners, and make sure the Land Registry Title reflects the position.  (You can read move about this is our article: Family Farm Ownership: Clearing the confusion)
2. Review Wills and the succession plan
   Many Wills were written years ago and may not match today’s priorities. For example, some Wills may pass assets to children on the first death rather than to a spouse or civil partner. Wills prepared on that basis often need to be reviewed and updated because it can affect what allowances are available later.
3. Keep values under review
   Land values can rise quickly. Machinery and livestock values can also change. An annual review helps you see whether your Farm is drifting above the allowances and whether your succession plan still works.
4. Plan for cashflow as well as tax
   Even where instalments are available, a tax bill still needs funding. Thinking ahead can help you avoid decisions made under pressure.

How Butcher & Barlow can help

If you are unsure how the proposed changes affect your farm, a review now can save stress later. We can help you:

• confirm farm ownership and how assets are held (personal, joint, Partnership or Company)
• review Wills so they match how you want the farm to pass on
• sense-check likely Inheritance Tax exposure if values continue to rise
• work with you and your accountant to develop a succession plan that keeps the Farm working day to day

Butcher & Barlow is pleased to support farming families with practical, workable and cost-effective advice for the family enterprise, whatever the size or nature.  For more information, or to book an appointment for a review, please contact our Agricultural and Rural Affairs Team on 01606 334309.

 

The information in this article was correct at the time of publication. The information is for general guidance only. Laws and regulations may change, and the applicability of legal principles can vary based on individual circumstances. Therefore, this content should not be construed as legal advice. We recommend that you consult with a qualified legal professional to obtain advice tailored to your specific situation. For personalised guidance, please contact us directly.