Draft Bill on Proposed Agricultural Property Relief and Business Property Relief Changes from April 2026

The UK government has announced significant reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) from inheritance tax, set to take effect from April 2026.

These changes, introduced in the Autumn Budget 2024, will likely have a major impact on those affected and it is advisable to review estate and Inheritance Tax planning at the earliest opportunity.

Key Changes

Relief Limits:

• 100% Relief: The current 100% relief will continue for the first £1 million of combined qualifying agricultural and business property.
• 50% Relief: For assets exceeding the £1 million threshold, the relief rate will be reduced to 50% for combined qualifying agricultural and business property.

Business Property Relief Adjustments:

• Shares Not Listed: The rate of BPR for shares not listed on recognised stock exchanges, such as the Alternative Investment Market, will be reduced from 100% to 50%.

Impact on Estates

The UK government has said that they expect the majority of estates claiming APR and BPR will remain unaffected by these reforms. It is estimated that around 3,000 estates making claims each year will not be impacted, while approximately 2,000 estates annually will be affected by the changes.

This includes around 500 estates claiming APR and around 1,000 estates holding shares designated as "not listed".

Having said this, this will not be much comfort to those individuals and families who will be negatively affected by the proposed changes and risk having to sell their businesses and family farms in order to pay IHT liabilities.

As mentioned, it is therefore important to consider all of the estate and IHT planning options at the earliest position opportunity to mitigate against the impact.

Anti-Forestalling Rules

To prevent avoidance of the new rules, anti-forestalling measures have been introduced for gifts made into trust or outright to another individual on or after 30th October 2024 and before 6th April 2026.

Essentially if the donor dies within 7 years of making the gift it will be subject to the new rules and therefore an unwelcome IHT liability could arise for the donee. If, however, the donor was to die prior to 6th April 2026 the current rules would apply and 100% relief for qualifying assets would not be capped at £1million.

Consultation and Feedback

The outcome of a consultation, scheduled to end on 23rd April 2025 to gather feedback from industry bodies and stakeholders, is expected later on in 2025. This consultation will provide further details, particularly regarding the application of the reforms to trusts.

Despite some opposition, the government appears to be committed to implementing these changes.

Planning Ahead

Given the significant implications, farmers and business owners are advised to review their inheritance tax strategies and consider potential adjustments to mitigate the impact of these reforms.

These changes represent a fundamental shift in inheritance tax planning, emphasising the need for proactive measures to ensure tax efficiency and asset protection.

Options available may including gifting of qualifying assets earlier with a view to surviving at least 7 years from the date of the gift in order for the value to be outside of the individual’s estate. Considering a life insurance policy that pays out an amount on death to help against the impact of the IHT changes and possible increases may also be an option for some.

How can Hegarty help?

Our team of experts are here to help advise and guide you, working towards getting the best outcome for you and your situation.

If you would like to discuss the upcoming changes to APR and BPR and how they may affect you, then please do get in touch with us.