The Autumn Budget introduced important changes to inheritance tax reliefs that directly affect farmers and rural business owners. These updates make it essential for agricultural families and rural businesses to plan effectively for the future. In this article, Sophie Powell Senior Manager of our Rural Business Team provides a breakdown of what’s changed and how it might impact you.
What Are Agricultural and Business Property Reliefs?
Agricultural Property Relief (APR) and Business Property Relief (BPR) are key tools for reducing inheritance tax on farmland and business assets. APR allows farmland to pass to the next generation with little or no inheritance tax, while BPR offers similar benefits for business assets. These reliefs have been invaluable for agricultural families and rural business owners, helping them pass on property without a heavy tax burden.
Key Changes Announced in the Budget
The recent Budget introduced a £1 million cap on the amount eligible for 100% relief under APR and BPR. For assets above this limit, the relief decreases to 50%. Notably, this £1 million cap is combined for both APR and BPR. This means that estates with both agricultural and business assets have a shared £1 million allowance. Additionally, some shares, like AIM-listed shares, will only qualify for 50% relief.
These changes may affect your estate, so it’s important to consider planning options if these updates will impact your family.
When Will These Changes Take Effect?
The changes are set to take effect on 6 April 2026. This timeframe gives rural business owners and agricultural families the chance to review estate plans and consider strategies to reduce potential inheritance tax liabilities.
What Does This Mean for Estates Over £1 Million?
If your estate’s agricultural or business assets exceed £1 million, it doesn’t automatically result in an inheritance tax charge. Tax is calculated after deducting reliefs and allowances, including the £325,000 nil-rate band and the £175,000 residence nil-rate band for property passed to direct descendants.
What Steps Should You Take Now?
If your estate is likely to be affected by inheritance tax, I encourage you to start by evaluating the value of your assets. Estate planning with expert Hereford accountants like our team at Thorne Widgery can help reduce your tax exposure.
Our Rural Business and Agriculture team is here to support you with personalised guidance, whether assessing your estate or discussing tax-saving strategies. Contact us to learn more about how we can assist with these changes to APR and BPR, ensuring you have the right plan in place for your family and business.