Recent changes to Agricultural Property Relief (APR) have become a major concern for farmers in the UK. Previous thresholds shielded many working farms from the full weight of Inheritance Tax. Now, sweeping reforms set for April 2026 are redrawing existing lines, capping relief and tightening rules in ways many owners have never faced before.
Here Steve Tobin, Tax Consultant at Haines Watts Wirral, outlines the key changes to APR, what the new allowance means in practice, and the practical steps rural businesses can take today to protect their assets.
Why APR matters for farmers
Agricultural Property Relief (APR) is an essential tool for Inheritance Tax (IHT) planning for anyone who owns farmland or rural property, the value of which can add up quickly. By reducing, or even removing, the 40 % IHT charge on transfers of qualifying agricultural assets, APR helps farming families hand land to the next generation without a forced sale. It currently applies at:
- 100% where the land or buildings are occupied for agriculture by the owner (or let on a post-1995 farm business tenancy) for at least two years, or seven years if let.
- 50% in more limited circumstances, typically older tenancy arrangements.
Crucially, APR covers only the agricultural value. Any “hope” or development uplift remains taxable.
What is changing in APR?
The Autumn 2024 Budget introduced the first major overhaul of APR in a generation. From 6 April 2026 the following rules will apply:
|
Area |
What’s changing |
What this means |
|
£1 million allowance |
Each individual will be able to claim 100% relief on up to £1 million of assets that qualify for 100 % APR and/or 100 % Business Property Relief (BPR). Anything above that figure will receive only 50 % relief. |
High-value farms and diversified estates face a partial IHT charge for the first time. |
|
No spousal transfer |
Any unused allowance is lost on the first death; it does not pass to a surviving spouse or civil partner. |
Traditional “all to spouse” wills could waste allowance. |
|
Trust cap |
Existing trusts created before 30 Oct 2024 keep a separate £1 million allowance; multiple trusts set up after that date will share one combined allowance. |
Earlier planning gains an advantage; later fragmentation is restricted. |
|
APR for environmental schemes |
From 6 April 2025 land entered into an approved long-term environmental agreement will still qualify for APR. |
Stewardship or ELMS participation no longer jeopardises relief. |
Who is likely to be affected?
Government papers suggest around 2,000 extra estates a year will see a higher IHT bill, raising roughly £500 million annually. The National Farmers’ Union warns a much larger proportion of commercial farms are asset-rich but cash-poor and will fall above the £1 million threshold once land, buildings and diversified trading assets are combined.
Key considerations for landowners and rural business owners
1. Joint ownership between spouses
With no transfer of unused allowance, holding land in a single name risks wasting relief. Splitting assets, via a declaration of trust or partnership capital accounts, gives each spouse or civil partner their own full £1 million cover at 100 %.
2. Impact on diversified income streams
Farm shops, holiday pods, livery and renewable projects often rely on BPR. From 2026 they will share the same cap as the core farm and, for many unquoted company structures, fall to 50 % BPR. This may accelerate plans to reorganise businesses, repay debt or ring-fence development value.
3. Trust review
Discretionary or life-interest trusts established before 30 October 2024 keep their own allowance. Trustees should quantify asset values now, model ten-year and exit charges after 2026 and decide whether to retain, merge or distribute.
4. Succession timing
Lifetime gifts completed before 6 April 2026 and satisfying the normal seven-year rule can still secure 100 % relief without using any new allowance. However, it’s important to note that any gift made where the donor dies after 5th April 2026 and hasn’t survived for 7 years since making the gift will only receive APR capped at the £1 million band
5. Cash-flow planning
Where a residual liability is unavoidable, families need a funding strategy that avoids a forced land sale. Instalment payment over ten years remains available for land and certain business property, but options such as whole-of-life insurance or borrowing facilities should be considered early.
How to plan your IHT strategy for new APR rules
When working with our clients, we approach planning from a strategic, long-term perspective. As is often the case with IHT planning, the sooner you plan, the better.
1. Calculate exposure:
Commission a professional valuation to split agricultural value from development or diversification value. Use the figures to model IHT under current and future rules.
2. Assess ownership structure:
Map who owns what. Where assets sit solely with one partner, explore transferring up to half the value to the other. Ensure any partnership or shareholder agreements mirror the intended split.
3. Refresh wills:
Simple mirror wills that leave everything to the survivor often worked under unlimited relief. Under the new regime, separate bequests of business property to children or into trust may preserve both allowances.
4. Review existing trusts:
Identify set-up dates, current values and future growth potential. Where post-30 Oct 2024 trusts share an allowance, consider whether consolidation or planned winding-up would minimise future 10-year charges.
5. Consider lifetime gifts:
Where succession is already planned, a timely outright gift can “bank” today’s 100 % relief. The donor must survive seven years and relinquish beneficial use.
6. Align with environmental agreements:
For marginal or stewardship-grade land, entering a qualifying agreement before April 2025 preserves relief and may generate guaranteed income streams compatible with succession objectives.
7. Check insurance and debt capacity:
Calculate any residual tax estimated at the 20 % effective rate (50 % relief × 40 % IHT) beyond the allowance. Compare the cost of life cover held in trust with the cost of long-term borrowing versus selling high-value, low-yield plots.
What happens next?
Draft Finance Bill legislation will progress through 2025. A technical consultation on the trust provisions is expected in early 2025, and final guidance is due later that year. Although amendments are possible, the core £1 million cap is widely viewed as politically settled.
How Haines Watts can help with IHT and APR
The clear message to all business owners is that the sooner you act, the more control you can exert over your future. Our team of tax experts have worked with hundreds of farmers and landowners to help them protect their assets and estates. If you’re looking to update your IHT strategy for the new rules, we can help tailor your plans to your goals and maximise long term benefits.
- Relief audit – a clear report showing which assets qualify at which rate now, and post-2026.
- Scenario modelling – side-by-side cash-flow comparison of gifting, trust retention, insurance and borrowing.
- Legal liaison – working with your solicitor to align wills, partnership agreements and share structures with the new rules.
- Ongoing monitoring – updates on legislation and market values so plans remain effective right up to, and beyond, April 2026.
The move from unlimited 100% APR to a capped regime is significant, but early, informed planning can help manage its impact. By quantifying exposure, optimising ownership, and exploring lifetime and trust strategies, rural families can continue to pass productive land and businesses to the next generation intact, while meeting their tax obligations with confidence.
For bespoke guidance, contact the Haines Watts team today.
