Government raises APR and BPR cap to £2.5m from April 2026

The Government has announced a significant change to inheritance tax (IHT) reliefs for farmers and business owners.  From 6 April 2026, the cap on Agricultural Property Relief (APR) and Business Property Relief (BPR) at the rate of 100% will be set at £2.5 million, more than doubling the previously expected £1 million limit.  This will have a huge impact on the available estate planning for any family that qualifies.

Following months of industry concern and political pressure, this move is designed to provide greater support for rural businesses and family enterprises, easing concerns over succession planning and long-term investment.

How does the new cap work?

From 6 April 2026, up to £2.5 million of the value of qualifying agricultural or business assets will benefit from 100% relief for IHT purposes.

Any value above £2.5 million will attract 50% relief, meaning an effective IHT rate of 20% on the excess.

Will the allowance be transferable?

Yes, between spouses or civil partners on death.  Originally announced not to be transferrable, this was also recently changed: the Government announced in November that any unused APR/BPR allowance can be transferred to a surviving spouse or civil partner.  

With the new £2.5 million allowance, this effectively allows spouses and civil partners to pass up to £5 million of qualifying agriculture or business assets tax free, and if taking into account the nil rate band and how it interacts with APR and BPR, up to £6.3 million per couple.

Which assets are covered?

The cap applies to the combined value of assets eligible for APR and BPR including:

• Assets in an individual’s estate on death.
• Lifetime chargeable transfer (i.e. gifts into trust).
• Gifts made on or after 30 October 2024, if the death occurs on or after 6 April 2026.

What about Trusts?

Trusts will also have up to a maximum of a £2.5 million allowance for 100% relief on each tenth anniversary or exit charge, however identifying how much of an allowance each Trust has will not always be simple.

Trust that were in place on 30 October 2024 will have the full £2.5m allowance provided that they held APR or BPR assets on that date.  These are ignored when assessing the allowance for trusts created after this date.

Any Trusts established since 30 October 2024 will have a part of the full allowance (up to the maximum of £2.5m) only if they received assets which qualified for APR or BPR from the settlor.  The allowance of a Trust will be fixed at the value of the qualifying assets when they were settled into the Trust (automatically, even if the settlor would prefer to save the allowance for a later Trust), and each person can only transfer a total of £2.5m of allowance into Trusts during their lifetime.

This is likely to cause significant confusion and surprise to anyone who does not take full advice on this.

Are there any other changes?

Shares in companies not listed on recognised stock exchanges (e.g. AIM shares) will only qualify for 50% relief (and so will not use the £2.5 million allowance after this change takes effect in April 2026).

The £2.5 million allowance will refresh every seven years for lifetime gifts, but the ability for trusts to acquire the trust allowance will not refresh – it will be a single lifetime allowance.  The trust allowance for each trust will apply for each ten year period (so that exits and anniversary charges will use the allowance).  The value of the allowance is expected to increase with planned indexation from April 2031.

What can I do now?

Please note that these changes are currently proposals, and have not yet been enacted into law, meaning they may still be subject to change.  While we await the Finance Bill 2026, we recommend that you should:

1. Assess your potential exposure to IHT under the proposed rules.  This should include a thorough review of all assets and liabilities within your estate.

2. Review your Will and any existing trusts from an IHT perspective.  Provisions that were previously tax-efficient may no longer offer the same advantages under the new regime.

3. Consider the liquidity of your estate to ensure there are sufficient assets to meet any tax liability.  Determine whether funds will be readily available or if assets may need to be sold.

There will be structures that can maximise both APR and BPR across married couples or those in civil partnerships.  Now that the allowance is transferrable between spouses and civil partners, it is no longer necessary to ‘bank’ the allowance of the first to die by transferring it into a Trust on death. However, we expect that this will remain a highly popular estate planning strategy, and with the right advice and Will structure it can lead to significantly increased tax saving.  For relievable assets up to £2.5 million the planning can double the relief in the right circumstances (saving up to £2m in IHT), with further savings available on additional relievable assets.

Every case will be different, and it is therefore important that you take advice specific to your personal circumstances.  Our Trusts and Estates team has a wealth of experience and are experts in delivering the best outcome for our clients.

If you would like to understand how these changes could impact your estate planning, speak to our specialist team today for tailored advice.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2026. Specific advice should be sought for specific cases. For more information see our terms and conditions.

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