The Government makes a U-turn on APR and BPR
Agricultural property relief and inheritance tax have been widely discussed in the media recently, following confirmation of changes that will take effect from April 2026.
On 23rd December 2025 the government announced that it would be raising the inheritance tax threshold to £2.5million for farmers and business owners coming as an early Christmas present to many. Further details are expected this month when the change is introduced to the Finance Bill.
The government announced in November 2025 that any unused Agricultural Property Relief (APR) or Business Property Relief (BPR) would be transferrable between spouses and civil partners. Therefore, couples and civil partners who jointly own qualifying agricultural and business assets, will be able to pass on £5million to the next generation (on top of other existing reliefs and exemptions) before any inheritance tax is paid.
By utilising all exemptions and nil-rate bands (to include the residence nil-rate band), a married couple or civil partners with qualifying agricultural or business property could effectively qualify for £6million relief before any IHT is paid (subject to £5million of this being in business or agricultural assets).
What’s Changing from April 2026?
As it currently stands, all qualifying agricultural and business assets are exempt from inheritance tax. From 6th April 2026, 100% relief will only be available on the first £2.5million of qualifying BPR and/or APR assets per individual. Anything over and above the threshold of £2.5million will benefit from 50% relief essentially paying inheritance tax at a rate of 20%.
For anybody who gifted qualifying agricultural or business property following the October 2024 budget, the good news is that any gift up to £2.5 million will now be exempt without the need to survive for 7 years to qualify for full IHT gift relief.
Planning Considerations for Farmers and Business Owners
There may now need to be some consideration given to the benefit of putting farms into the joint names of spouses allowing for 100% relief on the first £5million. Some caution will however need to be exercised, and consideration given to the potential of any future divorce.
This change will significantly reduce the number of farmers and business owners paying inheritance tax on their deaths but will still ensure that the largest estates are caught. The previous rules announced in the Autum 2024 budget would have seen lots of farming families having to sell land/assets in order to meet the inheritance tax bill. This increase in the tax-free allowance will hopefully significantly reduce the number of farmers having to do this. However, with the value of farmland increasing in Northern Ireland, will more farmers be falling above the £2.5 million threshold?
What Should You Do Now?
The clock is ticking and 6th April is just around the corner. Now is the time to do the following:
Review your IHT position in light of these changes with respect to your entire estate.
Review your Will. Is it tax efficient?
If your estate will still fall over the threshold, consider how the tax will be paid and how you can minimise your risk.
Get in touch today with a member of our Private Client team to discuss putting in place the best plan for the future of your farms and business.
Author: Kate McCandless and Rachael McKee
Kate McCandless
Solicitor
Email: kate.mccandless@davidsonmcdonnell.com
Direct Dial: 028 9099 9531
Rachael McKee
Senior
Solicitor
Email: rachael.mckee@davidsonmcdonnell.com
Direct Dial: 028 9099 2379