Changes to Agricultural Property Relief (APR) and Business Property Relief (BPR)

The Revised Rules for Agricultural Property Relief and Business Property Relief

Following the Autumn Budget of 2024, the longstanding Inheritance Tax (IHT) reliefs for Agricultural Property Relief (APR) and Business Property Relief (BPR) were changed. Under the revised rules, 100% relief was available on the first £1 million of qualifying assets, with the balance effectively taxed at 20% (half the normal IHT rate). The relief applied on an individual basis and was not transferable between spouses. This prompted many individuals to review and restructure their estates in an effort to minimise the potential tax consequences of the changes.

Following the 2025 review, the allowance was increased to £2.5 million per individual and is now transferable between spouses. This means that a married couple can leave up to £5 million of qualifying agricultural or business assets free from IHT, with any excess continuing to attract IHT at an effective rate of 20%.

With agricultural land values ranging from approximately £8,000 to £15,000 per acre, and with machinery and livestock also qualifying in many cases, it is not difficult for farming estates to exceed the exempt amount. Valuing trading businesses is generally more subjective, with values typically reflecting a combination of goodwill and tangible assets.

It remains worthwhile to review the value of qualifying assets and the potential IHT liability on death. Taking advice and making timely decisions can help preserve family wealth and avoid unnecessary tax liabilities or debt for future generations.

We now have a new Prime Minister and Chancellor, so these limits may change again and further planning may be required. There is a rumour that, during the 2024 review, hectares were confused with acres, which would explain the 2.5-fold increase in the allowance—but there is, of course, no evidence that this was actually the case!