The changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) due to take effect from 6 April 2026 have understandably caused concern for many farming families. While the government’s decision to increase the full relief threshold from the originally proposed £1 million to £2.5 million has eased some pressure, there is still uncertainty about what the reforms mean in practice and how best to prepare.

This article explains how the new system will work, which businesses are most likely to be affected, and why taking time to plan now can make a real difference later.

How the new system works

From 6 April 2026, the first £2.5 million of qualifying agricultural and business assets will receive 100% relief from inheritance tax (IHT). Any qualifying value above that £2.5 million threshold will receive 50% relief.

In practical terms, if your farm estate is valued at £3 million in qualifying assets, the first £2.5 million passes tax-free, while the remaining £500,000 receives 50% relief. Only £250,000 would be added to your taxable estate, potentially creating an IHT bill of £100,000 at the standard 40% rate.

This relief sits alongside the standard IHT allowances. Each individual has a £325,000 nil rate band, and potentially a residence nil rate band if a home passes to direct descendants. These allowances can normally be transferred between spouses or civil partners.

For married couples or civil partners, this means that — subject to appropriate structuring — up to £5 million of qualifying agricultural and business assets may benefit from full APR/BPR, in addition to their combined standard allowances.

Remember that APR and BPR apply only to qualifying agricultural or trading business assets. Non-farming investments, surplus cash, or let property that doesn’t qualify remains fully exposed to IHT at 40%.

The numbers: how many farms will pay more tax?

The government estimates that around 1,100 estates across the UK will pay more IHT in 2026–27 because of reforms.

Of these, up to 185 are forecast to be those claiming APR (including those also claiming BPR). More than 3,000 estates are expected to claim APR or BPR each year, meaning around 85% of estates claiming APR in 2026–27 are forecast to pay no additional IHT at all.

The estates most at risk tend to have high-value farmland, significant diversification, and a mixture of non-qualifying assets such as let property or investment portfolios, where total values can easily exceed the fully relieved band.

The inflation challenge: frozen thresholds and rising values

Both the £2.5 million APR/BPR thresholdand £325,000 nil rate band are fixed in cash terms and won’t rise with inflation or land values. Over time, this creates “fiscal drag” – where more estates fall into the IHT net simply because values have risen, even though the farm hasn’t expanded.

In many parts of England, farmland commonly trades at £8,000–£10,000 per acre or more. Consider this example: a 300-acre holding valued at £8,000 per acre equates to £2.4 million of land alone. If values move to £9,000–£10,000 per acre over the coming years, the same farm could be worth £2.7 million–£3 million before accounting for buildings, machinery, or diversified assets. Part of the holding would then only receive 50% relief, and the tax bill could rise significantly even though the business hasn’t grown in real terms.

If thresholds remain frozen for a decade while inflation and land values continue to rise, the proportion of farms facing IHT bills could increase substantially.

What you should do now

Professional advisers are emphasising that early planning is essential, particularly for larger, heavily diversified, or highly valuable units. The aim isn’t just to reduce tax, but to ensure that succession can occur without forced land sales or family disputes.

You should seek professional guidance from an accountant who specialises in agricultural taxation to understand your specific circumstances.

1. Understand your position. Work with your accountant to carry out an “asset audit” – list all assets and identify which qualify for APR/BPR and which are fully exposed to IHT. Review ownership structures carefully and use recent professional valuations where appropriate. Knowing whether your estate sits well below, around, or above the threshold will shape every other decision.
2. Review your business structure. For mixed or diversified businesses, your accountant can help you consider whether activities are organised in the most tax-efficient way for APR/BPR purposes. Ensure partnership and shareholders’ agreements reflect who actually owns what, and that this aligns with your wills. Outdated agreements or informal arrangements can jeopardise reliefs.
3. Update wills and succession plans. Review your wills with a solicitor to ensure they make full use of available allowances. Discuss succession openly with your family: who will run the farm, who will live where, and whether non-farming heirs can be provided for without fragmenting the business. Your accountant can help you consider lifetime gifts, share restructuring, or gradual handovers where appropriate.
4. Plan how any tax will be funded. If your accountant’s modelling shows a likely IHT bill, explore how it would be paid without selling essential land or buildings. Options include life insurance written in trust, structured borrowing, or earmarking non-core assets. While IHT on land can often be paid by instalments over ten years, analysis shows that — for some larger arable units — these instalments could absorb a significant proportion of annual profits if no provision has been made. Given the relatively low average returns in farming, relying on future profits alone carries real risk.
5. Keep good records. Maintain strong evidence for APR/BPR claims – tenancy agreements, business accounts, environmental scheme agreements, grazing licences, occupation records. Your accountant can guide you on what documentation HMRC will expect.
6. Review regularly. Revisit your succession and tax planning every few years with your accountant, solicitor, and land agent, especially if land values, diversification projects, or tax rules change.

Getting financing right

For farms that are likely to face an IHT bill, access to appropriate finance can be just as important as the tax planning itself. The question isn’t just about minimising the tax itself, but ensuring the business can actually meet its obligations without undermining long‑term viability.

Lenders need to understand the full picture – the trading operation, land and asset values, diversified income streams, and succession plans. They need to see thoroughly prepared applications that present your business credibly.

This is where specialist guidance becomes valuable. Arranging finance to cover IHT isn’t simply about finding the cheapest rate. It requires careful preparation, working with lenders who understand agricultural businesses and structuring borrowing in a way that supports long-term viability rather than undermining it.

Looking ahead

The introduction of a £2.5 million threshold has provided significant protection for many family farms in the short term. However, frozen thresholds, rising land values and inflation mean that more farms may be drawn into the tax net over the coming years unless ownership structures and succession plans are actively reviewed. Policy on farm taxation has already changed once, and further adjustments cannot be ruled out.

What’s clear is that early, informed planning gives families more control and more options. Taking time now to understand your position, review structures, update paperwork, and think about how any future tax could be funded can reduce pressure later.

If you would like to talk through how IHT liabilities might be funded, or explore your financing options as part of wider succession planning, we are always happy to have a conversation and offer guidance.