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View all Back United Kingdom Ireland Nexia Back Back search close Searching Saffery mailGet in touch Agricultural Property Relief and Business Property Relief reforms from 6 April 2026 Written by Graham Stewart 26 January 2026 newsmode Articles Back to Insights Share At the 2024 Autumn Budget, the Chancellor proposed significant changes to Agricultural Property Relief (APR) and Business Property Relief (BPR). On 21 July 2025 (Legislation Day or L-Day), the government published draft legislation and accompanying documents, along with the outcome of the consultation on how the reforms will apply to trusts. These confirm that the changes will be and largely go ahead from 6 April 2026, with a few minor amendments. Subsequent government announcements in late 2025 introduced further important updates. Overall, the reforms remain substantial, despite some concessions made following representations by us and other stakeholders as part of the consultation process and more general concerns raised by the farming and business communities. How APR and BPR currently reduce inheritance tax APR reduces the value of agricultural property and BPR reduces the value of business property when calculating inheritance tax (IHT). These reliefs may be given at either 100% or 50%, depending on the type and use of the asset, with no limit on the amount of relief that can be claimed. As a result, APR and BPR can significantly reduce, or even eliminate, IHT: When a person dies or gifts assets to another person or to a trust during their lifetime, and When a trust is subject to 10-year anniversary charges and charges on capital distributions. There are various conditions that must be met for APR or BPR to be available. For more, see our articles on Agricultural Property Relief and Business Property Relief. Changes to APR and BPR from 6 April 2026 for individuals Based on the latest draft legislation, from 6 April 2026, the 100% rate of APR and BPR will be capped at the first £2.5 million of combined agricultural and business property. The value of assets qualifying for APR or BPR above the £2.5 million limit will receive relief at 50%. The £2.5 million allowance will be index-linked from 6 April 2031 in line with the Consumer Prices Index (CPI). Any unused part of the £2.5 million allowance will be transferrable between spouses and civil partners, enabling couples to benefit from a combined allowance of up to £5 million, and the allowance will refresh every seven years. Shares not listed on a recognised stock exchange, such as those listed on the Alternative Investment Market (AIM), will qualify for 50% BPR instead of the current 100% relief, and this will not affect the £2.5 million allowance. The option to pay IHT by 10 interest-free annual instalments will be extended to cover all assets qualifying for APR or BPR. In addition, from 6 April 2027, most unused pension funds and death benefits will be included in a person’s estate for IHT purposes. The draft legislation sets out that APR and BPR will be specifically excluded from applying to the pension assets. Transitional rules apply to gifts made on or after 30 October 2024 but before 6 April 2026. These will initially be assessed under the old rules, but will fall under the new rules if the donor dies on or after 6 April 2026 and within seven years of making the gift. Actions to consider Estate planning should be reviewed, particularly for married couples and civil partners, as wills are likely to need amending to ensure the £2.5 million allowance of the first to die is not wasted. Wills sometimes include a standard clause saying that all property qualifying for APR/BPR is transferred to a child, with the non-relievable assets going to the surviving spouse/civil partner, and thereby being exempt from IHT. The wording of these clauses should be reviewed, as it may now lead to unexpected tax charges under the new rules. Regular lifetime transfers into trust may now become more popular, with both the £2.5 million allowance as well as the £325,000 nil rate band available. A married couple could potentially settle £5.65 million into trust tax-free every seven years. Lifetime giving generally will be more important. The gifts out of surplus income relief, which is often overlooked, can be very valuable. It will also become increasingly important to consider how asset ownership is structured and whether planning mechanisms and other reliefs, such as Conditional Exemptionand Woodlands Relief, apply. Pensions may also need reviewing. Previously, pensions were often left untouched due to their IHT-free status. These will now be taxable on death from 6 April 2027, and depending on the marginal tax rate of the beneficiary drawing down on them, can be assessed at an effective overall tax rate of 76%. In addition, the government has now confirmed that assets in pensions will not qualify for APR or BPR. Consideration will need to be given as to how any additional IHT will be funded. Life insurance could be taken out to cover the IHT exposure. Changes to APR and BPR for trusts Most trusts are within what is known as the relevant property regime. There are IHT charges for such trusts: Whenever assets are added to the trust, at up to 20%. Every 10 years on the anniversary of the creation of the trust at up to 6% of the value of the trust fund. Whenever capital is appointed out, at a proportion of the rate applying at the last 10-year anniversary (or equivalent rate that would have been charged on inception if within the first 10 years). These are known as exit charges. £2.5 million allowance Existing trusts that held property qualifying for 100% APR or BPR before 30 October 2024 (the date of the Autumn Budget) will each have their own £2.5 million allowance. Trusts created on or after 30 October 2024 by the same person (known as the ‘settlor’) will have an allowance of up to £2.5 million between them, allocated chronologically based on the value of qualifying property settled. One area we hoped the government would reconsider is the treatment of the £2.5 million allowance when a trust is wound up. Based on the draft legislation, any allowance allocated to a trust that is being wound up is simply lost, rather than becoming available again for future settlements. This may encourage the artificial retention of trusts solely to keep the allowance. IHT charges Capital appointments from existing trusts of assets settled before 30 October 2024 follow the old rules until the next 10-year charge. For assets settled since the 2024 Budget, the old rules apply only until 5 April 2026. The first 10-year charge following 5 April 2026 will benefit from unlimited 100% relief for the period prior to 5 April 2026, with the new rules regarding the £2.5 million cap applying to the period post 5 April 2026. Thereafter, IHT on the appointment of capital will be calculated based on the rate used at the last 10-year charge, but now ignoring any APR or BPR (at either 100% or 50%) that was available then. The trust’s allowance is available to offset against the value of any qualifying property being appointed, but this will reduce the allowance available at the next 10-year charge. The allowance then refreshes again after the next 10-year charge, for the following 10-year period. Proposed change not being implemented Based on responses to the consultation, including ours, the government has decided not to go ahead with extending the related property rules which may have added additional complexity to the valuation of shareholdings. Qualifying property settled by the same settlor into different trusts will not be treated as ‘related property’ for valuation purposes. Actions to consider Although, the draft legislation may change further before it’s enacted, many trusts are being reviewed now: There is a narrow window between now and 6 April 2026 when the transitional rules apply: – Assets can still be settled into trust with unlimited 100% relief (subject to the relevant conditions being met), although there will be a clawback charge if the settlor dies within seven years and after 5 April 2026. – Assets can be appointed out of trusts under the old rules, ie with uncapped 100% relief, and without affecting the rate of tax at the next 10- year anniversary charge. For pre-existing trusts, this can be done until the date of the next 10-year charge itself. Existing trusts that held qualifying property on 29 October 2024 will have their own £2.5 million allowance, so there is a strong argument for retaining these as part of any restructuring, although each case will depend on its own facts. Any trusts settled post-2024 Budget with qualifying property will have utilised some of the settlor’s trust allowance, so consideration should be given to retaining these. Some individuals may consider transferring £2.5 million of qualifying property into trust now (potentially with £325,000 of non-qualifying property if their nil rate band is available) in order to start the seven-year cycle. It will also become increasingly important to consider how asset ownership is structured and whether planning mechanisms and other reliefs, such as Conditional Exemptionand Woodlands Relief, apply. Trustees will need to consider how any additional IHT will be funded. Some trusts can pay IHT from income, but specific conditions must be met. This is a point we are currently discussing with many of our clients. How we can help The legislation is complex, and the most appropriate next steps depend on the specific circumstances and requirements of the individuals, trusts and beneficiaries in question. If you would like to discuss how these changes could affect your business succession or estate planning, or trust arrangements, please contact us. Get in touch Name This field is for validation purposes and should be left unchanged. 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