Six days ago, on 6 April 2026, one of the most significant inheritance tax reforms in a generation quietly came into force. The new restrictions on Agricultural Property Relief (APR) and Business Property Relief (BPR) now cap the combined 100% relief at £2.5 million per individual — and for business owners, farming families, and anyone holding qualifying assets above that threshold, the implications are substantial.
If you own a trading company, hold shares in an unquoted business, or run a family farm, this is not a change you can afford to park for later review. The new rules are live, and the window for effective planning is narrowing.
What Has Changed
Until 5 April 2026, qualifying business and agricultural assets could benefit from 100% relief from inheritance tax (IHT), regardless of value. A business owner with £10 million of qualifying trading company shares paid no IHT on those assets at death. That blanket exemption has now ended.
From 6 April 2026, the first £2.5 million of combined APR and BPR-qualifying assets per individual continues to attract 100% relief. Any value above that threshold now receives only 50% relief — meaning the excess is effectively taxed at 20% (half the standard 40% IHT rate). For a business owner whose qualifying assets are worth £5 million, the IHT exposure on death has jumped from zero to £500,000.
This is not a minor tweak. It is a fundamental shift in how the UK taxes the transfer of business and agricultural wealth between generations.
Who Is Affected
The reform catches a wide range of asset holders. The most obvious are owners of trading companies — whether sole traders, partnerships, or shareholders in unquoted companies — whose business assets exceed £2.5 million. But the net extends further than many initially appreciated.
Farming families are particularly exposed. Agricultural land values have risen sharply over the past decade, and it is not uncommon for a mid-sized family farm to be worth well in excess of the new threshold. The combination of land, buildings, and machinery can quickly push a farming estate into the partially-relieved bracket.
AIM-listed shares also face a separate, harsher treatment. From 6 April 2026, shares listed on the Alternative Investment Market (AIM) that previously qualified for 100% BPR now receive only 50% relief — and critically, this applies from the first pound of value, not just above the £2.5 million cap. The AIM shares do not count against your £2.5 million allowance, but they no longer enjoy full relief at any level. For investors who built AIM portfolios specifically for IHT planning, this is a significant blow.
The Spousal Transfer Rule
There is some relief in the detail. Any unused portion of the £2.5 million allowance is transferable between spouses and civil partners. In practical terms, this means a married couple could shelter up to £5 million of combined APR and BPR-qualifying assets at the 100% relief rate, provided their wills and estate planning are structured correctly.
This is an important nuance, because it means that the order and manner of asset transfers on the first death can have a material impact on the total IHT bill on the second death. Couples who have not reviewed their wills since the announcement should treat this as urgent. A will drafted under the old rules — where 100% relief was unlimited — may inadvertently waste the first spouse’s £2.5 million allowance by leaving everything to the surviving spouse outright.
Instalment Payments and Cash Flow
Recognising the liquidity challenge this reform creates, the Government has extended the option to pay IHT on qualifying APR and BPR assets by ten annual interest-free instalments. This applies to all assets qualifying for the reliefs, not just those above the cap.
For executors and personal representatives dealing with illiquid business or agricultural assets, this is a meaningful concession. A £500,000 IHT bill spread over ten years at £50,000 per year is far more manageable than a single demand — particularly where the business itself needs to fund the payment. However, it is worth noting that the interest-free status applies only if payments are kept on schedule. Miss a deadline, and the full outstanding balance may become payable immediately.
Trust Implications
The reform also has consequences for assets held in trust. Business and agricultural assets within trusts will be subject to the same £2.5 million cap on 100% relief. Where multiple trusts hold qualifying assets, HMRC will aggregate these for the purposes of the threshold — so splitting assets across several trusts will not circumvent the cap.
This is an area where existing trust arrangements need careful review. Trusts established years ago on the assumption of full BPR or APR may now generate unexpected IHT charges on ten-year anniversaries or on exit. Trustees and their advisers should be modelling the impact now, not waiting for the next periodic charge to arrive as a surprise.
Index-Linking From 2031
The £2.5 million allowance will be index-linked to the Consumer Prices Index (CPI) from 6 April 2031. Until then, it is frozen. Given that business valuations and agricultural land prices tend to rise over time, the real value of the allowance will erode between now and 2031 for anyone whose assets are growing. This makes early planning all the more important.
What Business Owners and Farming Families Should Do Now
The first and most critical step is to obtain a current, realistic valuation of all assets that could qualify for APR or BPR. Many business owners have not had a formal valuation done in years, and estimates based on old numbers are no longer good enough when a £2.5 million threshold determines the tax treatment.
Second, review your will. If you are married or in a civil partnership, your will should be structured to ensure the first spouse’s £2.5 million allowance is used effectively — not wasted by a simple “everything to my spouse” clause. This may mean incorporating a discretionary trust or specific legacy to utilise the allowance on the first death.
Third, consider the timing and structure of lifetime transfers. Assets gifted during your lifetime fall out of your estate after seven years, and the £2.5 million allowance refreshes every seven years. For those with the capacity and willingness to give away business or agricultural assets during their lifetime, this creates a planning opportunity — but one that must be weighed against the practical reality of giving up control.
Fourth, if you hold AIM shares for IHT purposes, reassess whether that strategy still makes sense. With only 50% relief available from the first pound, the effective IHT rate on AIM portfolios is now 20% — still lower than the standard 40%, but a far cry from the zero rate that made AIM-based IHT planning so attractive.
Finally, speak to your adviser. The interaction between the new APR/BPR rules, the nil-rate band, the residence nil-rate band, and existing trust arrangements creates a complex matrix of planning considerations. Generic guidance can only take you so far — what matters is how the rules apply to your specific circumstances.
The Bigger Picture
This reform reflects a clear policy direction: the Government wants to ensure that the wealthiest estates contribute more to the public finances, while maintaining a meaningful relief for smaller business and farming operations. Whether the £2.5 million threshold achieves the right balance is a matter of ongoing debate — particularly among farming communities who argue that land-rich, cash-poor estates will bear a disproportionate burden.
What is beyond debate is that the rules have changed, and they have changed now. Waiting is not a strategy.
Talk to Tanous about your IHT exposure and business succession planning — contact us at tanous.co.uk.