The saga of Agricultural Property Relief and Business Property Relief changes continues….

Since the October 2024 Budget, the arcane world of Inheritance Tax (IHT) reliefs has been thrown into turmoil. The Chancellor, Rachel Reeves, announced that the value of assets qualifying for Agricultural Property Relief (APR) and Business Property Relief (BPR) would be capped at just £1m from 5 April 2026. What neither she – nor, perhaps more accurately, her Treasury team – seemed to anticipate was the scale of the fallout this would trigger in the farming community in particular, some 14 months later.

 

Almost immediately, a well-organised farming lobby began pushing back hard against what quickly became branded as a new “farm tax”. For a measure forecast to raise a relatively modest £300m per annum, the political cost started to look significantly higher than the fiscal gain.

 

Backbench MPs representing rural constituencies soon added to the pressure, pointing out that a £1m cap would barely cover 100 acres of decent arable land. Farms of this size are rarely attractive to Private Equity buyers – the supposed villains of the piece – because many such units simply don’t generate the level of profitability they seek.

 

By the time we reached the delayed 2025 Budget in November, it was clear the Chancellor was feeling the heat from all sides. In response, she proposed allowing the initial £1m APR/BPR allowance to be transferable on death between spouses and civil partners. This concession was welcomed as a step in the right direction, but it still fell well short of what bodies such as the NFU were calling for.

 

Then, just days before Christmas – the classic moment to bury a political U-turn – came the real surprise. The qualifying allowance would not just be tweaked, but substantially increased to £2.5m. On current estimates, this would mean only around 15% of larger farm businesses and SME trading companies would fall within the IHT net (although there remains plenty of debate about how those liability figures have been calculated).

 

And that, for now at least, is where we’ve landed on APR and BPR.

 

YOUR NEXT STEPS

 

• Take stock of the capital tied up in your farming or trading business – including equity, partners’/directors’ capital accounts and any external business assets.
• Form your own view of the current “open market value” of those interests – and be ready for that figure to be rigorously tested
• Set this alongside your non-business wealth – your main home, any second or holiday properties, investment portfolio, pensions and other personal assets – to build a complete picture.
• Estimate your potential IHT exposure and the reliefs and allowances you expect to claim under the new APR/BPR framework.
• Share your workings with Langricks so we can “mark your homework” and, more importantly, highlight practical ways to safeguard both business and personal assets from avoidable IHT.

To discuss your position in confidence, contact Nigel Shaw on 07540 113289 for a free consultation.