In the Autumn Budget 2024, the government announced planned changes to Agricultural Property Relief (APR) and Business Property Relief (BPR). Further updates followed in the Autumn Budget 2025. Below is our summary of the changes and what they may mean for business owners.
Key points
From 6 April 2026, a new £2.5 million 100% relief allowance applies to the combined value of assets qualifying for APR and BPR, for both individuals and trusts.
Any value above £2.5 million qualifies for relief at 50% rather than 100%, resulting in an effective 20% inheritance tax (IHT) charge on the excess.
The £2.5 million allowance refreshes every seven years for lifetime gifts and every ten years for trusts. It is expected to be index-linked from April 2031 in line with the Consumer Prices Index, subject to government approval.
Shares in unlisted companies (including AIM-listed companies and EIS shares quoted on AIM) qualify for relief at 50% only.
Any unused allowance is transferable between spouses or civil partners, even where the first death occurs before 6 April 2026.
What has changed?
Individuals now have a £2.5 million allowance for assets qualifying for 100% APR and/or BPR.
This allowance applies both during lifetime and on death. Gifts of qualifying assets made on or after 30 October 2024 will reduce the available allowance on death if the donor dies on or after 6 April 2026.
For lifetime gifting, the allowance refreshes every seven years. There are plans for indexation from April 2031, although this will depend on future legislation.
Trusts also benefit from a £2.5 million allowance for 100% relief. This “trust allowance” refreshes every ten years.
Assets exceeding the allowance receive 50% relief, giving rise to an effective 20% IHT charge. This applies to both individuals and trusts.
Shares in companies not listed on recognised stock exchanges (such as AIM companies) only qualify for 50% relief.
Trust exit charges are standardised and calculated on unrelieved values (before APR/BPR), regardless of whether the exit occurs before or after the first ten-year anniversary.
On death, any unused allowance can be transferred to a spouse or civil partner. However, the deceased’s ownership period does not transfer, meaning the surviving spouse or partner must meet the relevant conditions themselves.
The option to pay IHT in up to 10 equal annual instalments, interest-free, is extended to all property eligible for APR/BPR.
How does the new cap work?
From 6 April 2026, up to £2.5 million of qualifying agricultural or business assets benefit from 100% IHT relief.
Any value above this threshold qualifies for 50% relief, resulting in an effective IHT rate of 20% on the excess.
Is the allowance transferable?
Yes, between spouses or civil partners on death.
Although the allowance was initially proposed as non-transferable, this was later revised. Any unused allowance can now pass to the surviving spouse or civil partner.
In practice, this means couples can pass up to £5 million of qualifying agricultural or business assets free from IHT.
Which assets are covered
The cap applies to the combined value of APR and BPR qualifying assets, including:
Assets held within an individual’s estate on death
Lifetime chargeable transfers (such as gifts into trust)
Gifts made on or after 30 October 2024, where death occurs on or after 6 April 2026
What about trusts?
Trusts can benefit from a £2.5 million allowance for 100% relief at each ten-year anniversary or exit event. However, calculating the available allowance may not always be straightforward.
Trusts in existence on 30 October 2024 benefit from the full £2.5 million allowance, provided they held qualifying APR or BPR assets at that date. These trusts are not taken into account when assessing allowances for trusts created after that date.
Trusts established after 30 October 2024 receive a portion of the allowance (up to £2.5 million), based on the value of qualifying assets settled into them. This value is fixed at the time of settlement, even if the settlor would prefer to use the allowance differently. A maximum of £2.5 million applies per settlor.
This is an area where complexity can arise, and taking advice will be important.
Are there any other changes?
Unlisted shares (including AIM shares) qualify for 50% relief only and do not use the £2.5 million allowance.
The allowance refreshes every seven years for lifetime gifts. However, for trusts, the ability to create new trust allowances does not refresh — it is effectively a lifetime cap per settlor. Each trust’s allowance then applies to its ongoing ten-year charges.
The allowance is expected to increase with indexation from April 2031.
What can you do now?
You may want to:
- Assess your potential exposure to IHT under the new rules
- Review your Will and any existing trust arrangements
- Consider the liquidity of your estate to ensure any tax liability can be met without the need to sell key assets
There may also be opportunities to structure assets more effectively between spouses or civil partners to maximise available reliefs. As the allowance is now transferable, it may no longer be necessary to “bank” relief on first death through the use of trusts.
To speak to a member of our team today regarding your situation: Contact Us – EQ Chartered Accountants