Agricultural and Business Property Reliefs changes 

Introduction

In the Autumn Budget 2024 the Chancellor announced that restrictions to Agricultural Property Relief (APR) and Business Property Relief (BPR) will apply from 6 April 2026. Following the announcement, a technical consultation has been held and draft legislation has been published.

This document contains a high-level overview of the planned changes.

APR and BPR restrictions  

• A combined £1million allowance will be 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) will be restricted to 50% relief.
• The changes are to take effect from 6 April 2026. Some interim measures will apply.
• The draft legislation includes provisions for the allowance to increase with inflation from April 2030.

£1million 100% relief allowance

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

Individuals

• Individuals will each have a £1million allowance. This will be 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 will be apportioned across all eligible assets.
• The allowance is to be modelled on the nil rate band. It will refresh every seven years and it will be offset against chargeable transfers on a chronological basis – i.e. against the earliest transfers first.
• The allowance (or unused element) will not be transferable to a spouse or civil partner on death. This means that if an individual dies and owns less than £1million of relievable assets, the unused allowance will be lost. 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, £1million 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 will be capped at £1million, with 50% relief on any additional value.
• The £1million relievable assets allowance will be 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.
• There are currently differences in the way that exit charges are calculated before and after the trust’s first ten-year anniversary. The government intend to align the rules so that the rules that currently apply before trust’s first ten-year anniversary will apply in all cases. In summary, these changes will mean that APR and BPR are ignored when considering the tax rate to use.
• Anti-fragmentation rules will be introduced in order to prevent individuals reducing their inheritance tax liabilities by settling assets into multiple trusts. This will be achieved by having a single £1million allowance for across trusts settled by the same settlor.
• The settlor’s allowance is to be allocated to trusts in the order trusts are settled (e.g. £250,000 100% relievable assets settled on trust 1 = a £250,000 allowance for trust 1. £750,000 of 100% relievable assets settled on trust 2 = a £750,000 allowance for trust 2. No allowance remains for transfers to trust 3).
• The trustees’ available allowance is to be 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.
• The government have confirmed that they will not be changing the related property valuation rules to take account of related assets held in other trusts settled by the same settlor when calculating exit and periodic charges.

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 £1million allowance will be 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 will use all or part of the surviving spouse’s £1million allowance. Lifetime gifts made between 30 October 2024 and 5 April 2026 will be taken into account when calculating inheritance tax charges on deaths after 5 April 2026.
• Employee benefit trusts and temporary charitable trusts are subject to a specific tax regime that applies exit charges but not ten-year charges. The £1million allowance will not refresh every ten years.

Transitional rules

Transfers made before 30 October 2024

Individuals

• Transfers made before 30 October 2024 will be 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 will not use up any of the £1million 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’ £1million allowance when calculating the next ten-year charge.
• When the first ten-year charge under the new regime is calculated, the £1million 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.

Transfers made between 30 October 2024 and 5 April 2026 (inclusive)

Individuals

• Inheritance tax charges that arise before 6 April 2026 will be calculated under the existing rules, with unlimited 100% BPR and APR, including for AIM shares.
• The new rules will 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

• Exit charges on trust distributions that are made before 6 April 2026 will be taxable under the rules which are currently in force, which means that unlimited 100% APR and BPR may apply.
• Trust distributions made before 6 April 2026 will not use up any of the trustees’ £1million allowance, including distributions of assets that were settled on or after 30 October 2024.
• The new rules will apply to property that was settled on trust on or after 30 October 2024 and is distributed on or after 6 April 2026. Distributions will use the £1million allowance on a chronological basis from 6 April 2026 (as set out above) and relief on AIM shares will be restricted to 50%.
• Gifts to other individuals will be taken into account for the purposes of the £1million allowance where the gift is made between 30 October 2024 and 5 April 2026 and the transfer becomes chargeable on or after 6 April 2026 due to death occurring within seven years of the gift.

Interest-free instalments

From 6 April 2026, the government intends to extend a ten-year interest-free inheritance tax instalment plan for eligible assets so that it will be available for inheritance tax arising on all APR and BPR assets.

Find out more…

This note reflects the law in force on 22 October 2025. It also refers to the consultation outcome and draft legislation published on 21 July 2025. Changes may be made before enactment.

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.