Further Changes Announced to Agricultural and Business Property Relief Cap

The government has announced further amendments to its proposed reform of agricultural and business property relief (APR and BPR), following sustained engagement with stakeholders in the farming and business communities. These changes materially alter the scope of the measures originally announced and will be of particular interest to landowners, family businesses and their advisers.

In the 2024 Autumn Budget, the government confirmed that unlimited 100% relief for qualifying agricultural and business property would be withdrawn from April 2026. Under the initial proposal, a combined cap of £1 million was to apply, with any qualifying assets above that threshold benefiting from relief at a reduced rate of 50%.

The announcement prompted significant concern, particularly within the agricultural sector, where land values can be substantial despite relatively modest income streams. Among the issues raised was the proposal that the £1 million allowance would not be transferable between spouses or civil partners if unused, departing from the established inheritance tax treatment of nil rate bands.

In response, the Autumn 2025 Budget confirmed that the allowance would be transferable between spouses and civil partners, aligning the relief more closely with existing inheritance tax principles.

More recently, and less than a month after that Budget, the government has announced a further and more substantial amendment. Under the revised proposal, each individual will be entitled to a £2.5 million transferable allowance for qualifying agricultural and business property. This represents a significant increase on the originally proposed cap and substantially expands the value of assets that may continue to benefit from 100% relief, particularly for married couples and civil partners.

The accompanying announcement indicated that the revised approach is intended to protect ordinary family farms. From a legal and tax planning perspective, the increased allowance meaningfully reduces the potential inheritance tax exposure for many estates that would otherwise have been affected by the earlier proposals.

While the direction of travel is now clearer, key questions remain. Further detail will be required once draft legislation is published, including how the revised allowance will operate in practice, its interaction with existing reliefs and nil rate bands, and whether any transitional provisions will apply ahead of implementation in April 2026.

In the meantime, it is now important to consider how the £2.5 million combined allowance will affect your farm/business; how your assets are owned and whether a more tax efficient approach could be adopted and also the use of a specially drafted Will can claim allowances upon death and ensure any unused allowances are transferred between spouses.

For more information and advice, contact Philip Hartley our Agricultural Specialist on 01625 503444 or email [email protected].

Article written by Philip Hartley – Agricultural Specialist at Thorneycroft Solicitors