You reap what you sow: APR and BPR reforms and what they mean for inheritance tax planning

Historically, APR and BPR offered up to 100% inheritance tax relief on the entire value of agricultural property and business interests. Given the ordinary inheritance tax rate is 40%, the availability of 100% relief encapsulates the very purpose of APR and BPR: to preserve farms and family businesses for future generations.

Without APR and BPR, agricultural property and business interests would be subject to hefty inheritance tax charges when they are gifted over in lifetime or passed down on death. In a lot of cases, this inheritance tax charge would force the sale of those very assets, destroying farms and businesses, and leaving future generations with washed up assets that could no longer provide income, employment and livelihoods, nor contribute to the economy. Therefore, APR and BPR are incredibly useful tax reliefs for passing illiquid, yet buoyant, wealth down the generations.

Although APR and BPR is now restricted, the recent update announced on 23rd December 2025 does represent more of a middle ground than the previously-announced changes in the 2024 Autumn Budget, which set to reduce the APR/BPR allowance to just £1m. This U-Turn (increasing the allowance from £1m to £2.5m and confirming the availability of transferring a spouse’s allowance) was certainly a welcome announcement coming into 2026.

From 6 April 2026, APR and BPR will no longer be available against the entire value of relevant assets. Instead:

• the first £2.5m worth of qualifying assets will be able to claim APR/BPR (still up to 100% albeit this £2.5m is combined between APR and BPR);
• 50% of the value of those assets over and above the £2.5m threshold will be subject to inheritance tax at 40% - in other words, the balance in value over and above £2.5m is subject to an effective 20% inheritance tax rate;
• spouses and civil partners can share any unused portion of the other’s £2.5m allowance, meaning £5m of farm or business assets can pass free from inheritance tax on the second death of a married couple/civil partners.

APR/BPR claims are technical, fact-heavy and nuanced and it is important to consider matters in the round when looking at these reliefs. Very accurate valuations of such assets will now be required, to calculate the tax payable, which adds additional expense and a time burden on such taxpayers, which previously did not exist when these assets were 100% exempt. Various considerations such as how assets are owned and the length of ownership, the nature and location of assets, lifetime gifting, and documents such as Wills, Partnership Agreements and Shareholders’ Agreements, can all have a substantial impact on APR and BPR.

Therefore, whilst “a penny off a pint in the pub” (also announced in the 2024 Autumn Budget) may have eased some initial concerns about the APR/BPR changes, when it comes to inheritance tax planning, the old adage is true: you reap what you sow. Asking us for professional advice and getting suitable documents and mechanisms in place in your lifetime can make all the difference in protecting your hard-earned assets for your loved ones down the line.