From 6 April 2026, inheritance tax on farms and rural estates is changing — and the impact could be significant.

For years, most family farms have been passed down tax-free. The combination of Agricultural Property Relief (APR) and Business Property Relief (BPR) has provided up to 100% exemption from inheritance tax on farmland, buildings, and trading businesses.

That protection is about to be capped — and many farmers could face inheritance tax bills for the first time.

Where are we now? What are APR and BPR?

Inheritance tax (IHT) is typically charged at 40% on the value of an estate above the nil-rate band — currently £325,000 per person, plus an additional allowance for passing on a home.

However, two reliefs have historically helped farming families protect their land and businesses from IHT:

Agricultural Property Relief (APR)

APR reduces the IHT due on land and buildings used for agriculture. This includes farmland, farmhouses, and outbuildings. If the land is farmed (by you or a tenant), and held for the required period (typically 2 years if farmed by you, 7 years if let), you may receive 100% relief on the agricultural value.

Business Property Relief (BPR)

BPR applies to business assets, such as:

• Shares in a farming company
• Business equipment or land used in a sole trader or partnership
• Certain farming partnerships

Provided the business is actively trading and not investment-based, BPR can also give up to 100% relief.

These reliefs are crucial. For example, a family owning £3 million plus in farmland and trading assets could currently pass that to the next generation entirely tax-free — allowing the farm to continue without interruption or debt.

What’s changing?

From 6 April 2026, the rules are being overhauled:

• 100% relief capped at £1 million per individual (APR and BPR combined)
• 50% relief applies to the value above that cap
• Resulting in an effective 20% IHT charge on the portion above £1 million
• No transfer of unused relief to a surviving spouse
• No separate limits for APR and BPR — they share the same £1m cap

We covered the broader inheritance tax changes in this article — this follow-up focuses specifically on the impact for farmers and landowners.

Why it matters for rural estates

This is no small tweak — it’s the end of unlimited IHT relief on farming estates.

If your land, property, or business assets exceed £1 million in value, under the new rules you could face an inheritance tax bill.

Here’s a real-world example:

• A farming estate worth £3 million (after deducting available Nil Rate Bands)
• £1m qualifies for 100% relief
• The remaining £2m gets 50% relief = £1m taxable
• IHT due = £400,000

If a surviving spouse inherits everything, and their partner’s £1m relief isn’t used, the final IHT bill could increase by as much as £200,000 on the second death. That’s because unused APR/BPR relief isn’t transferrable.

What qualifies — and what doesn’t?

This is where detail matters.

APR applies only to genuine agricultural property used for farming. Land with development potential or non-farming use (e.g. solar, horse grazing, paddocks) may not qualify — or may only get partial relief.

BPR applies only to actively trading businesses — not investment holdings or companies with significant non-trading activities. We often see family farming companies inadvertently disqualify themselves by holding too much cash, let properties, or passive assets.

The practical risks

1. Assuming Everything’s Covered

Many families assume everything will qualify for relief — until it doesn’t. HMRC routinely challenges claims on technical grounds.

2. Liquidity Problems

Even with a 10-year instalment option, paying IHT means finding real cash. That might mean selling land, livestock, or taking on debt. We’ve seen family farms face serious disruption — or worse, forced sales — because of poor planning.

3. Missed Spouse Allowances

If one partner passes away and the entire estate goes to the survivor, their £1m relief is lost forever. Careful will structuring is now more important than ever.

4. Unclear Succession Plans

If you haven’t started planning who will take over, or when, you may find the April 2026 deadline catches you out. Once the new rules apply, the tax exposure increases significantly.

What you should do now

Here are the key actions we recommend every landowner considers today:

• Get a Full Estate Review

Work out how much of your estate qualifies — and how much won’t. Include land, buildings, shares, equipment, and all ownership structures.

• Use Both APR/BPR Allowances

Structure ownership and wills so that both spouses’ £1m allowances are used. This might involve life interest trusts or partial transfers to children at the right time.

• Consider Lifetime Transfers

Gifting farmland or business interests more than 7 years before death could take them outside the IHT net completely.

• Check You Still Qualify

APR and BPR come with rules — minimum ownership periods, qualifying use, and business status. What qualified 5 years ago may no longer qualify now. Review every asset.

• Plan for Tax Payment

Even if a tax bill is inevitable, plan now how it will be paid. Life insurance, savings, or carefully timed asset sales can reduce the pressure on the family.

• Update Your Will

If your will simply leaves everything to your spouse, you may be missing out on a £1m relief. An outdated will could cost your family six figures in unnecessary tax.

Now is the time to act!

There isn’t time to wait and see whether lobbying efforts succeed.

A cross-party committee of MPs (EFRA) has called for a one-year delay to the inheritance tax reforms, citing a lack of consultation and proper impact assessment. They’ve recommended deferring the April 2026 changes until 2027 to give farmers more time to plan.

But at this stage — it’s just a recommendation.

You need to act now. The rules are changing, and without proactive planning, the impact could be severe.

Start the conversation with your accountant. Review your estate. Update your will. Make sure your assets qualify.

At bk plus, we’re working with farming families across the UK to navigate these changes. We understand the pressures — and we know how to plan around them.

Don’t let uncertainty delay your decisions. Take control. Speak to our team today.