If you own a farm or a share in a family business, you may have been told that inheritance tax was not something your family needed to worry about. For a long time that was close to the truth. It is not any more, because Agricultural Property Relief and Business Property Relief now come with a cap.

The reliefs still exist, and they are still generous. But above a certain value, the bill is no longer nil. Here is the picture in plain English.

What Agricultural and Business Property Relief do

Agricultural Property Relief, usually shortened to APR, reduces the value of qualifying farmland and farm buildings when inheritance tax is worked out. Business Property Relief, or BPR, does the same job for qualifying trading businesses and certain shares in them. Both come from the Inheritance Tax Act 1984.

For gifts made before 30 October 2024, 100% relief was unlimited in value. A qualifying farm worth £4 million could pass on with no inheritance tax charged on it at all. That is the part that has gone.

The £2.5 million relief allowance

There is now a £2.5 million allowance for each person. It covers the combined value of everything qualifying for 100% relief, so a farm and a business share draw on the same allowance rather than having one each. The allowance is reduced by any qualifying transfers made in the previous seven years.

Above the allowance, relief drops to 50%, which the government describes as an effective rate of up to 20% rather than the standard 40%.

The allowance belongs to the individual, and any unused part of it can be transferred to a surviving husband, wife or civil partner. That transfer has to be claimed, and there are time limits for doing so. Where all the conditions are met, a couple could potentially pass on up to £5 million of qualifying assets with full relief.

The new rules apply to deaths and other chargeable transfers on or after 6 April 2026. They also reach back to lifetime gifts of qualifying property made on or after 30 October 2024, where the person who made the gift dies on or after 6 April 2026 and within seven years of giving it away. Gifts made before 30 October 2024 are not caught.

The usual allowances still sit underneath

The £2.5 million figure comes on top of the allowances every estate gets. The nil-rate band lets you pass on £325,000 free of inheritance tax, and it has been at that figure since 2009. Where a home passes to direct descendants, such as children and grandchildren, the residence nil-rate band can add up to a further £175,000. Both are frozen until April 2031. Our free inheritance tax calculator will give you a rough sense of where your estate sits.

Three things worth knowing

• Shares are not all treated the same. Shares in a private company can still qualify for 100% relief within the allowance. The 50% rate applies to certain other holdings, including shares traded on a recognised exchange but designated as not listed, such as AIM shares. Those holdings do not use up the £2.5 million allowance.
• Trusts have their own allowance. Relievable property held in trust has a £2.5 million allowance of its own, though trusts set up by the same person on or after 30 October 2024 may have to share one. When the new rules start to apply also depends partly on when the trust was created.
• Qualifying comes first. Who holds the land, whether there is a partnership, and whether the business counts as trading all affect whether the reliefs apply at all. A cap only matters if the property qualifies in the first place.

Paying the tax without selling the farm

Where inheritance tax is due on agricultural or business property inherited from 6 April 2026, it can be paid in ten equal annual instalments without interest on the outstanding balance. That matters, because the asset creating the bill is usually the last thing a family wants to sell. Two points to note: the change does not apply to instalment arrangements already running before that date, and interest can still be charged if an instalment is paid late.

What you can do now

Start with a value. Plenty of families have never had the land, the buildings and the business share properly valued, and the £2.5 million line is impossible to think about without a number.

Then read your Will. Wills drafted when the reliefs were unlimited often leave everything to the surviving spouse and deal with the children later. That can still work well, because unused allowance can be transferred. It is worth checking rather than assuming.

One word of caution before anyone starts restructuring. Both reliefs have minimum periods for owning or occupying the property, so a change made in a hurry can cost a family more than it saves. Our Wills and Trusts services are a sensible place to start, and for a working farm or a trading company you will want a solicitor or tax adviser alongside us.

Where you are matters too

Inheritance tax applies across the United Kingdom, so the £2.5 million allowance is the same wherever the farm or the business is. Agricultural tenancies work differently in Scotland and Northern Ireland, and Scotland has its own rules on who inherits, so what you have read here is written for England and Wales.

If you would like to talk through what this means for your family, your farm or your business, you can start with our free inheritance tax calculator or book a free consultation. No pressure, just a friendly chat.

This article is general information for England and Wales, correct as at 3 November 2026. It is not legal, tax or financial advice, and the rules can change. Squiggle Consult are estate planning consultants, not solicitors or financial advisers, and are not authorised or regulated by the Financial Conduct Authority. Please seek personal advice about your own circumstances.