In Autumn Budget 2024, the Chancellor announced that restrictions to the amount of Agricultural Property Relief (APR) and Business Property Relief (BPR) will apply from 6 April 2026. APR and BPR currently give up to 100% relief from Inheritance Tax (IHT) on qualifying agricultural and business property.

Draft legislation for the restrictions was published in July 2025.

WHAT IS EXPECTED TO HAPPEN?

A new £1m allowance will apply to the combined value of business and agricultural property assets that qualify for 100% relief under APR or BPR. The new allowance is in addition to the existing IHT nil-rate bands and exemptions.

Where the combined value of business and agricultural property assets exceeds the £1m allowance, the rate of relief will be reduced to 50% on the value of any qualifying relievable property over the £1m allowance.

For individuals, the £1m allowance will cover:

• Property in an estate at death.
• Lifetime transfers to individuals in the seven years before death.
• Chargeable Lifetime Transfers (CLTs) where there is an immediate lifetime charge (e.g. most transfers into trust).

In addition, BPR will be reduced to 50% on shares designated as ‘not listed’ on the markets of recognised stock exchanges – this means that 100% BPR will no longer be available on AIM shares.

WHAT IS THE IMPACT OF THE RESTRICTION?

A simple example would be an individual whose estate includes shares in an unquoted trading company valued at £2 million. Under the current rules, 100% BPR would be available, meaning none of the shareholding is subject to IHT. If the proposed restriction applies, only £1 million BPR is available. The remaining £1 million of the shareholding would be subject to 50% BPR, meaning £500,000 would form part of the estate subject to IHT. The £325,000 nil rate band would still be available to offset against the estate subject to IHT.

WHAT CAN BE DONE NOW?

It is impossible to plan effectively until the potential tax exposure is known, so the first step is to establish the potential exposure to IHT as a result of the changes and estimate the scale of any IHT liabilities which may arise from 6 April 2026. This step should include a comprehensive analysis of all likely assets and liabilities in a person’s estate, along with how they will be distributed under their Will.

Wills should also be reviewed carefully from an IHT perspective – there may be some simple changes which might improve the overall IHT position.

As noted above, the changes announced are proposals and not yet law. While it may be wise to start to plan, remember that we do not yet know the final rules. If the proposals affect you, please speak to us.