From 6 April 2026, Agricultural Property Relief and Business Property Relief give 100 per cent inheritance tax relief only on the first £2.5 million of combined agricultural and business property, with 50 per cent relief above that, an effective 20 per cent rate. The £2.5 million allowance is transferable between spouses. The widely quoted £1 million figure was raised at Budget 2025.
TL;DR · LAST REVIEWED 1 SEPTEMBER 2026
- From 6 April 2026, 100 per cent APR and BPR relief is capped at the first £2.5 million of combined agricultural and business property.
- Above £2.5 million, relief falls to 50 per cent, an effective inheritance tax rate of 20 per cent.
- The £2.5 million allowance is transferable between spouses; the widely quoted £1 million figure is out of date.
Agricultural and Business Property Relief from 6 April 2026
| Item | Detail |
| 100 per cent relief cap | First £2.5 million of combined agricultural and business property |
| Relief above the cap | 50 per cent, an effective 20 per cent inheritance tax rate |
| Transferable between spouses | Yes, so a couple can pass on up to £5 million |
| Standard nil-rate band | 325,000 pounds, on top of the APR and BPR allowance |
| Paying the tax | Up to 10 annual instalments, interest free |
| Unlisted and AIM shares | 50 per cent relief, separate from the £2.5 million allowance |
Source: GOV.UK and HMRC, 2026
KEY FACTS
- From 6 April 2026, 100 per cent APR and BPR relief is capped at the first £2.5 million of combined agricultural and business property (GOV.UK).
- Above the cap, relief is 50 per cent, an effective inheritance tax rate of 20 per cent rather than the standard 40 per cent.
- The £2.5 million allowance is transferable between spouses and civil partners, so a couple can pass on up to £5 million.
- The originally announced £1 million cap was raised to £2.5 million and made transferable at Budget 2025.
- Inheritance tax on qualifying assets can be paid over 10 interest-free annual instalments.
What has changed, and when
Until 6 April 2026, qualifying agricultural and business property could pass free of inheritance tax with no limit, through Agricultural Property Relief and Business Property Relief at 100 per cent. From 6 April 2026 that changes. The 100 per cent rate now applies only to the first £2.5 million of combined agricultural and business property; above that, relief drops to 50 per cent, which means an effective inheritance tax rate of 20 per cent on the excess rather than the standard 40 per cent. Importantly, the cap was originally announced as £1 million at the Autumn 2024 Budget, then raised to £2.5 million and made transferable at Budget 2025, so any guidance still quoting £1 million is out of date.
The allowance and married couples
The £2.5 million allowance now works much like the nil-rate band. Any unused portion on the death of a spouse or civil partner transfers to the survivor, so a married couple can pass on up to £5 million of qualifying agricultural and business property at 100 per cent relief between them. This transferability was not in the original draft and materially changes the planning picture. The allowance sits on top of the standard 325,000 pound nil-rate band and the usual spousal exemptions, so the true tax-free headroom for a couple is higher again.
What it could mean for a farm or business
The effect depends on value. An estate of qualifying property under £2.5 million, or under £5 million for a couple using both allowances, continues to pass at 100 per cent relief as before. Above the allowance, the 50 per cent relief applies: on a £4 million single estate, the first £2.5 million is fully relieved and the remaining £1.5 million gets 50 per cent relief, leaving 750,000 pounds taxable at 40 per cent, an inheritance tax bill of 300,000 pounds. That tax can be paid over 10 interest-free annual instalments. These are illustrations, not advice; individual reliefs, valuations and structures vary.
Gifts, pensions and planning
Two further points matter for succession planning. Lifetime gifts made on or after 30 October 2024 fall under the new cap if the person giving them dies on or after 6 April 2026 within seven years, under the standard seven-year rule for gifts. Separately, from 6 April 2027, most unused pension funds and death benefits will be counted within a person's estate for inheritance tax, though APR and BPR do not apply to pension assets. Because the interaction of reliefs, allowances and gifts is complex, anyone affected should take advice from a qualified solicitor or tax adviser before acting.
DISCLAIMER
This article is editorial information, not financial advice. Kael Tripton Ltd is not authorised or regulated by the Financial Conduct Authority. Figures were correct at the last review date shown above; verify current rates and rules with the primary sources listed below before acting.
Frequently asked questions
What is Agricultural Property Relief
Agricultural Property Relief is an inheritance tax relief on qualifying agricultural property, such as farmland and farm buildings, that reduces or removes the inheritance tax due when the property passes on death or by gift.
What changed on 6 April 2026
The 100 per cent rate of Agricultural Property Relief and Business Property Relief is now capped at the first £2.5 million of combined agricultural and business property, with 50 per cent relief above that, an effective 20 per cent inheritance tax rate.
Is the cap 1 million or 2.5 million pounds
It is £2.5 million. The cap was originally announced as £1 million at the Autumn 2024 Budget, then raised to £2.5 million and made transferable between spouses at Budget 2025. Guidance still quoting £1 million is out of date.
Can the allowance transfer between spouses
Yes. Any unused £2.5 million allowance transfers to a surviving spouse or civil partner, like the nil-rate band, so a couple can pass on up to £5 million of qualifying property at 100 per cent relief.
How can the inheritance tax be paid
Inheritance tax on qualifying agricultural and business property can be paid over 10 equal annual instalments, interest free, which can ease the pressure to sell assets to meet the bill.
SOURCES
- GOV.UK: changes to agricultural property relief – accessed 1 September 2026
- GOV.UK: Business Relief for Inheritance Tax – accessed 1 September 2026
