The 2024 Autumn Budget introduced sweeping reforms to Inheritance Tax (IHT) reliefs for business and agricultural property, with significant implications for business owners, farmers, and their families. These changes, set to take effect from 6 April 2026, mark the most substantial overhaul of Business Relief (BR) and Agricultural Relief (AR) in decades. Here’s what you need to know and how you can prepare.
Current rules: a brief overview
Business relief (BR):
BPR currently allows qualifying business assets—such as shares in unquoted trading companies or interests in a business/partnership—to be passed on free of IHT (at 100% relief) or at a reduced rate (50%), provided certain conditions are met. This relief is a cornerstone of succession planning for family businesses.
Agricultural relief (AR):
AR offers similar relief for agricultural land and property, again at 100% or 50% depending on the circumstances. The relief is available for land and property used for agricultural purposes and is a vital relief for farmers wishing to pass on their farming business to the next generation without triggering a large IHT bill.
What’s changing from 6 April 2026?
Introduction of a £1 Million Cap for 100% Relief
From 6 April 2026, the most generous 100% rate of relief for both BR and AR will be capped at the first £1 million of qualifying business and agricultural property per estate. Any value above this threshold will only qualify for 50% relief. This is a significant departure from the current regime, where there is no upper limit on the value qualifying for 100% relief.
Combined cap across both reliefs
The £1 million cap applies to the combined value of assets qualifying for both BR and AR. This means that if an estate includes both business and agricultural property, only the first £1 million in total will attract 100% relief; the remainder will be subject to the reduced 50% rate.
Extension of AR to environmental land management
From 6 April 2025, AR has been extended to cover land managed under environmental agreements with government or approved bodies. This is a positive development for landowners engaged in protecting, restoring or enhancing the natural environment, ensuring that the transactions in such land can also benefit from IHT relief.
Reduced relief for aim listed shares
Shares traded on unlisted markets, such as AIM, will only qualify for 50% relief, regardless of their value or the overall size of the estate. This change will particularly affect those holding significant investments in AIM-listed companies, who previously benefited from 100% relief.
Why are these changes being made?
The government’s stated aim is to better target relief at smaller and family-run businesses and farms, while curbing the ability of very large estates to benefit from unlimited 100% relief. The government also expects the reforms to raise significant additional revenue for the Exchequer. Research suggests however that the changes announced could result in a net fiscal loss to the government.
Transitional arrangements
- The new rules will apply to deaths and chargeable transfers occurring on or after 6 April 2026.
- Estates and chargeable transfers before this date will continue to benefit from the current, more generous rules.
- HMRC ran a technical consultation in early 2025 to clarify the finer details of how the new cap and combined threshold will operate in practice.
Practical implications and next steps
For business owners and farmers:
If your estate includes business or agricultural property valued above £1 million, you will see a substantial increase in your IHT liability. Those with significant holdings in AIM or other unlisted shares will also be affected, as these will only attract 50% relief going forward.
Estate planning considerations:
With these changes on the horizon, it is more important than ever to review your estate planning strategy. Consider the timing of transfers, maximising the spouse exemption, the structure of your business or land holdings, and the transfer of assets during your lifetime to mitigate the potential impact on your family’s inheritance tax position.
Seek professional advice:
Given the complexity and significance of these reforms, we strongly recommend seeking professional advice to understand how the new rules will affect your specific circumstances and to explore planning opportunities before the changes take effect.
Conclusion
The 2024 Budget’s reforms to BR and AR represent a fundamental shift in the inheritance tax landscape for business and agricultural assets. With the introduction of a combined £1 million cap for 100% relief and reduced relief for unlisted shares, careful planning will be essential to mitigate the impact on your estate.
If you would like to discuss how these changes may affect you, please contact our team for tailored advice.
