APR and BPR increase to £2.5m: what the 2026 IHT changes mean for farmers and business owners

There have been welcome changes to the proposed new regime for inheritance tax (IHT) for farm and other business owners. The need to make a plan for the hand over to the next generation in life or on death remains to be done. The part reversal of the IHT changes may make this easier to do.

The government announced on 23 December 2025 that agricultural property relief (APR) and business property relief (BPR) for IHT will be increased from £1m to £2.5m when it is introduced in April 2026. There will be doubling up between spouses, giving married couples combined relief on farming and business assets of £5m. 

For those with such assets over £5m, there is still an extra tax charge coming in April 2026, and so there is still lifetime planning to do. With assets of £5m, the changes have taken us back all the way to September 2024 with the opportunity to pass the business IHT free to the next generation on death – but the plan for this could still be put in place.

A recap of IHT changes since October 2024

Before the Budget in October 2024, assets qualifying for APR or BPR could pass entirely free of IHT.

Budget 2024 announced that come April 2026 the reliefs would be capped at £1m per taxpayer, with the excess value taxed at 20%. There would no doubling up between spouses - this meant spouses might only get £1m of reliefs between them unless they each owned such assets and used trusts in their wills.

For farm and other business owners, the impact on cash flow is that there may be a 20% tax bill payable after a death. This can be paid over 10 years but the numbers can be significant and unaffordable for a business, particularly with illiquid assets such as land. This prompted some to pass assets down to the next generation now to reduce the tax burden on the business and the family.

Budget 2025 in November announced that the allowance will be automatically doubled up, allowing spouses to qualify for a double relief between them, without further planning.

The current IHT position and what it means for farmers and business owners

The current position now is that the first £2.5m - or £5m between spouses or civil partners – is tax free – and the rest is taxed at 20%.

If assets are worth more than £5m then thought might still remain with gifting the assets in lifetime to reduce the tax. 7 years needs to be survived, and so if there is uncertainty about the next heir – for example if they are not quite ready to take the assets on – a trust could be used to start the 7 year clock and delay the final decision on the next heir.

For those with assets under £5m the thought might be that the issue has gone away. The IHT issue may certainly have gone away. What the part reversal of the IHT changes has done is removed one obstacle - tax- to deciding on who the heir is and when they inherit. The part reversal of the IHT changes has not removed the need to think about making a plan about the future – indeed removing the IHT obstacle may perhaps mean it is easier to make a plan. All of the thought which may have gone into lifetime gifting may still be relevant, or at least now be captured in your will to delay the gifting until death.

We can hope that the December announcement is the last of the changes so that farm and business owners can plan for the future.

If you’d like to understand how the changes to APR and BPR could affect your farm or business, please get in touch with one of our wills and estate planning lawyers.