Business and Agricultural Relief After April 2026

If you farm, or you own a business, you have probably read something alarming lately and half remember a figure. That figure is very likely £1 million. It is out of date.

The combined allowance for 100% Agricultural Property Relief and Business Property Relief is £2.5 million, and has been since 6 April 2026. The £1 million figure came from Autumn Budget 2024 and was raised to £2.5 million on 23 December 2025. Ask an AI chatbot today and it may well still say £1 million, which is why we wrote when AI gets it wrong.

How we got here, in three dates

• 30 October 2024, Autumn Budget 2024. From 6 April 2026, 100% relief capped at a combined £1 million per person, 50% above that.
• 26 November 2025, Budget 2025. The allowance made transferable between spouses and civil partners.
• 23 December 2025. Raised from £1 million to £2.5 million, still starting 6 April 2026.

All of it is now law, in Schedule 12 to the Finance Act 2026 and HMRC's policy paper.

Please read this bit. This corner of inheritance tax has changed twice in eighteen months and remains politically live. Check the current position on GOV.UK, or with a professional, before you act.

What the two reliefs are

Business Property Relief, usually shortened to Business Relief, reduces the value of qualifying business assets when inheritance tax is worked out. Agricultural Property Relief does the same for the agricultural value of farmland and farm buildings. Both have offered up to 100% relief since March 1992, so families need not break up a working farm or sell a trading business to pay a tax bill. Before 6 April 2026 there was no cap. That is the change: the reliefs have not been abolished, they have been limited.

What changed on 6 April 2026

• A combined £2.5 million allowance at 100% relief. One allowance per person, covering agricultural and business property together, not £2.5 million for each.
• 50% relief above it, which with inheritance tax at 40% is an effective rate of 20%.
• Transferable between spouses and civil partners. Anything unused on the first death passes to the survivor, much like the nil rate band, and must be claimed. Where the first death was before 6 April 2026, a full £2.5 million is assumed, however long ago.
• Up to £5.65 million for a couple, on GOV.UK's figures: two allowances plus two £325,000 nil rate bands.
• A separate £2.5 million allowance for property held in trust.

The other numbers: the nil rate band stays at £325,000, frozen to 5 April 2031; the residence nil rate band is £175,000; inheritance tax is 40%, or 36% where 10% or more of the net estate goes to charity. From 6 April 2027 most unused pension funds also join the estate, covered in Pensions and Inheritance Tax.

The £2 million trap

The residence nil rate band tapers by £1 for every £2 by which an estate exceeds £2 million. Here is what catches farming families out: for that test HMRC counts the estate after liabilities but before any reliefs. A £3 million farm that pays no inheritance tax at all can still lose the residence nil rate band entirely (IHTM46023, and see The Residence Nil Rate Band).

How the allowance is allocated

Where an estate holds both, nobody chooses where the allowance lands.

1. Lifetime gifts first. Qualifying gifts made on or after 30 October 2024, where death follows within seven years, use it up first, oldest to newest. See Gifts and the Seven Year Rule.
2. Then the estate, proportionally. Whatever is left is spread across every qualifying asset in proportion to its value. HMRC is blunt: it "must be divided proportionally across the estate" and "you cannot apply it all to a single asset".

Where an asset could qualify for either relief, Agricultural Relief applies first, and you cannot claim both on the same value. HMRC publishes an apportionment tool.

AIM shares and other traded unquoted shares

This one matters. Shares admitted to trading on a recognised stock exchange but not "listed" on it, which includes AIM shares, now attract a flat 50% relief in every case, however large or small the holding. Before April 2026 they could attract 100%. They also sit outside the £2.5 million allowance: they do not use any of it up, and they do not benefit from it. GOV.UK is explicit that "some property does not use up the £2.5 million allowance and can only receive 50% relief", naming AIM. The same applies to shares on overseas exchanges that are not recognised stock exchanges. So a £1 million AIM holding leaves the full £2.5 million intact for other qualifying property, and half its value stays taxable.

A necessary word on regulation. Squiggle Consult is a firm of estate planning consultants, not authorised or regulated by the Financial Conduct Authority, and we do not give investment advice. Nothing above is a view on whether AIM shares, Business Relief investment products or any other investment are right for you. For that, speak to an FCA authorised adviser.

What actually qualifies

The ownership period

• Business Relief: two years. The deceased must have owned the business or asset for at least two years before death.
• Agricultural Relief: two years, or seven. Two years where the land was occupied for agriculture by the owner, a company they controlled, or their spouse or civil partner. Seven where somebody else occupied it.

Trading, not investment

Business Relief is for trading businesses. It is not available where a business consists wholly or mainly of dealing in securities, stocks and shares, land or buildings, or making or holding investments. HMRC's manual calls this "likely to be the main area of concern" (IHTM25261). Furnished holiday lets, caravan parks and mixed farming enterprises sit on that line.

Excepted assets

Relief only covers what the business needs. An asset is left out unless it was used wholly or mainly for the business throughout the two years before the transfer and is required then for future use (IHTM25351). Surplus cash beyond working needs is the usual example.

Farmhouses, let land and agricultural value

• Agricultural value, not market value. The relief covers only what the property would be worth if it could only ever be used for farming. The extra a farmhouse fetches as a country home is not covered.
• Farmhouses and cottages must be of a size and nature appropriate to the farming actually going on. A cottage must be occupied by a farm worker, a retired farm employee, or their surviving spouse or civil partner.
• Let land. 100% relief where the owner farmed it, where it was used under a short-term grazing licence, or where it was let on a tenancy beginning on or after 1 September 1995. Older tenancies generally get 50%.

What does not qualify

• A business dealing wholly or mainly in securities, stocks or shares, land or buildings, or in making or holding investments.
• Not-for-profit organisations.
• A business under a binding contract for sale, unless the buyer is a company that will carry it on and pays the estate mainly in its shares. Hence cross-option agreements rather than binding buy-outs: see Business Owners: When You Die or Lose Capacity.
• A business being wound up, unless that is part of letting it carry on.
• For Agricultural Relief: farm equipment and machinery, derelict buildings, harvested crops and livestock. Some may still qualify for Business Relief.

Trusts holding business or agricultural property

Trusts have their own £2.5 million allowance against ten-year and exit charges. Those created before 30 October 2024 each have a standalone allowance. Those created on or after that date share a single £2.5 million cap across all trusts made by the same settlor, so setting up several does not multiply it. Trustees must now track usage, and exit charges are worked out on pre-relief values. If you have such a trust, it deserves a proper look. See Do I Need a Trust?.

Paying the bill: the instalment option

Inheritance tax on qualifying agricultural and business property can be paid in ten equal annual instalments, the first due at the end of the sixth month after death. From 6 April 2026 those instalments are interest-free, and no interest runs on the outstanding balance. Interest still runs on any instalment paid late, and the balance falls due in full if the asset is sold. The old rules continue for plans already running (GOV.UK). Tax at an effective 20% over ten years with no interest is a very different proposition from a lump sum in six months.

A worked example: a farm and a business in one estate

Imagine Helen, who dies in 2027. She never married, so she has one £2.5 million allowance and one £325,000 nil rate band. Her estate is farmland and buildings with an agricultural value of £2,100,000, unquoted trading shares in the family engineering company worth £900,000, and £300,000 of cash. Qualifying relievable property is £3 million, so the allowance is spread in proportion to value: 70% farm, 30% company.

• Farm: £1,750,000 at 100% relief, the remaining £350,000 at 50%, so £175,000 chargeable.
• Company: £750,000 at 100% relief, the remaining £150,000 at 50%, so £75,000 chargeable.

That is £250,000 from the relieved assets plus £300,000 of cash, so £550,000. Take off the nil rate band and £225,000 is taxable at 40%: £90,000, payable over ten years interest-free. Her estate for the taper test is £3.3 million before reliefs, so the residence nil rate band has gone entirely.

Had Helen been widowed, a second £2.5 million allowance could have been claimed and there would have been no tax at all. That is why both spouses' wills matter. Hypothetical example only.

Questions to bring to a professional

• Is the succession plan written down? Who takes over, when, and what happens to those who do not.
• Do both wills use both allowances? Leaving everything to a spouse is exempt anyway, so it can quietly waste an allowance a trust or a gift down a generation would have used. See Writing Your Will.
• Is there a cross-option agreement, drafted as options rather than a binding sale, and does it match the will and the shareholder agreement?
• When was the business or the land last properly valued?

Common mistakes

Still working to the £1 million figure. Plans built on the old number may be doing damage that is no longer necessary.

Assuming the allowance can be steered. It is spread proportionally, so you cannot point it at the asset you most want sheltered.

Forgetting that lifetime gifts eat the allowance. Qualifying gifts from 30 October 2024 come first if death follows within seven years.

Treating AIM shares as though they use the allowance. They do not, in either direction, and getting it backwards can misstate a bill by hundreds of thousands.

Assuming no tax means no paperwork. Executors must still value everything, claim the reliefs, apportion the allowance and evidence the conditions. See Estate Administration.

For how all this sits alongside gifts, trusts and pensions, see Inheritance Tax Mitigation.

Questions? Book a free call

If you farm, or you have built a business, this is a lot to carry alongside the day job. Pick a time that suits and your local Squiggle consultant will call you. No charge, no obligation, no pressure, just a friendly chat about where your family stands. Book a call or call 01233 659 796.

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This factsheet is general information for England and Wales, not legal, tax or financial advice. Squiggle Consult is not authorised or regulated by the Financial Conduct Authority and does not give investment advice. These rules changed twice between October 2024 and December 2025 and remain subject to change, so please check the current position before acting. Last reviewed: August 2026.