Agricultural and Business Property Reliefs changes 

Introduction

Major changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) apply from 6 April 2026. This document contains a high-level overview of the changes.

APR and BPR restrictions  

• A combined £2.5million allowance was introduced for 100% relief for APR and BPR assets, with relief for any amounts in excess of the allowance being restricted to 50%.
• Shares of any value listed on the Alternative Investment Market (AIM) are now restricted to 50% relief.
• The changes took effect from 6 April 2026. Some interim measures apply.
• The allowance is legislated to increase with inflation from April 2031.

£2.5million 100% relief allowance

The application of the allowance to individuals and trustees is summarised below.

Individuals

• Individuals each have a £2.5million allowance. This is a combined allowance that applies to both APR and BPR property (‘relievable assets’). Where multiple relievable assets are subject to an inheritance tax charge, the allowance is apportioned across all eligible assets.
• The allowance is modelled on the nil rate band. It refreshes every seven years and is offset against chargeable transfers on a chronological basis – i.e. against the earliest transfers first.
• The allowance (or unused element) is transferable to a spouse or civil partner on death. This means that if an individual dies and owns less than £2.5million of relievable assets, the unused allowance is passed on. The full £2.5million allowance is available to a surviving individual if their spouse or civil partner died before 6 April 2026. Spouses and civil partners who own relievable assets may wish to consider the value of their estate, especially when assets are held in one person’s name. Wills should also be considered.
• The allowance can be used against transfers during lifetime that give rise to inheritance tax charges. This includes both gifts to individuals that become chargeable due to death occurring within seven years of making the gift and most lifetime transfers into trust.
• Individuals are subject to 40% inheritance tax on death, to the extent the estate exceeds the value of the nil rate band, £2.5million relievable assets allowance (from April 2026) and any other available reliefs or exemptions. No inheritance tax is payable to the extent that assets qualify for 100% APR or BPR. If 50% APR or BPR is available, the effective rate of inheritance tax reduces to 20%.

Trustees of relevant property trusts

• Most trusts created during lifetime and some trusts created on death are relevant property trusts in which trustees pay up to 6% inheritance tax every ten years and on capital distributions from trusts. These charges are reduced by any available reliefs, exemptions and the available nil rate band.
• Currently unlimited 100% relief can apply to APR and BPR assets. From 6 April 2026 100% relief is capped at £2.5million, with 50% relief on any additional value.
• The £2.5million relievable assets allowance is applied to trust distributions on a chronological basis, first applying to the earliest distributions from the trust.
• Any remaining allowance can be used on the next ten-year anniversary. If no allowance remains, a maximum of 50% APR or BPR will apply resulting in a tax charge of up to 3% of the value of trust’s assets.
• Anti-fragmentation have been introduced in order to prevent individuals reducing their inheritance tax liabilities by settling assets into multiple trusts. This is achieved by having a single £2.5million allowance for across trusts settled by the same settlor.
• The settlor’s allowance is allocated to trusts in the order trusts are settled (e.g. £1million 100% relievable assets settled on trust 1 = a £1million allowance for trust 1. £1.5million of 100% relievable assets settled on trust 2 = a £1.5million allowance for trust 2. No allowance remains for transfers to trust 3).
• The trustees’ available allowance is fixed when assets are settled. This may be relevant if multiple trusts are to be settled, and/or if assets are distributed or fall in value. The allowance cannot be transferred to other trusts and any available allowance which is unused is lost.

Specific types of trusts

• 18-25 trusts are trusts set up for young individuals who are bereaved by the death of a parent and who will receive trust assets by age 25. To avoid disadvantaging younger siblings, a £2.5million allowance is available on transfers to each trust beneficiary.
• Qualifying interest in possession trusts include trusts set up on an individual’s death that give their surviving spouse the right to occupy the family home or receive trust income for life, with the assets subsequently passing to the children. Ten year and exit charges do not apply. Instead, the value of trust assets are within surviving spouse’s estate. From 6 April 2026, these trust assets use all or part of the surviving spouse’s £2.5million allowance.
• Employee benefit trusts and temporary charitable trusts are subject to a specific tax regime that applies exit charges but not ten-year charges. The £2.5million allowance does not refresh every ten years.

Transitional rules

Transfers made before 30 October 2024

Individuals

• Transfers made before 30 October 2024 are not affected by these changes. Unlimited 100% APR and BPR will continue to apply even if inheritance tax becomes payable after 5 April 2026.
• Gifts made before 30 October 2024 do not use any of the £2.5million allowance.

Trust inheritance tax charges for assets settled on trust before 30 October 2024

• APR and BPR assets settled on trust before 30 October 2024 will be brought into the scope of the new regime on the trust’s first ten-year anniversary which occurs after the new rules take effect on 6 April 2026. Until then, unlimited 100% APR and BPR will remain available where exit charges apply on distribution of trust assets, and such exits will not use any of the trustees’ £2.5million allowance when calculating the next ten-year charge.
• When the first ten-year charge under the new regime is calculated, the £2.5million allowance will cap the amount of BPR and APR available, though on a proportionate basis based on how long has elapsed since 6 April 2026. Unlimited APR and BPR will remain available to the extent the ten-year period under consideration falls before 6 April 2026.

Post 5 April 2026 taxation of transfers made between 30 October 2024 and 5 April 2026 (inclusive)

Individuals

• The new rules apply to inheritance tax charges that arise on or after 6 April 2026 in respect of gifts made between 30 October 2024 and 5 April 2026. This includes inheritance tax that arises due a death within seven years of making a gift, whether that is a gift to another individual (a potentially exempt transfer) or a gift to trustees (chargeable lifetime transfers).

Trustees

• The new rules apply to property that was settled on trust on or after 30 October 2024 and is distributed on or after 6 April 2026. Distributions eligible for 100% APR or BPR will use the £2.5million allowance on a chronological basis from 6 April 2026 (as set out above)

Interest-free instalments

From 6 April 2026, interest-free instalments for payment of inheritance tax over ten years has been extended to a wider range of assets.  

Find out more…

This note reflects the law in force on 21 April 2026. To find out more about any aspect of the above, please discuss with your usual Deloitte contact. If you do not have a usual contact, please contact Michelle Robinson (michellerobinson@deloitte.co.uk). For further information visit our website at www.deloitte.co.uk.