From 6 April 2026, agricultural property relief (APR) and business property relief (BPR) give 100% inheritance tax relief on the first £2,500,000 of combined qualifying agricultural and business property per person, and 50% relief on the value above that (gov.uk, as at August 2026, subject to change). This is the core of the farm inheritance tax reform that took effect in the 2026-27 tax year.
Before this reform, qualifying farmland and many trading businesses could pass free of inheritance tax without an upper limit on the 100% rate. The reform keeps full relief for a substantial band of value and then applies a reduced rate above it, which means some larger agricultural and business estates now face an inheritance tax charge for the first time. This guide sets out how the new allowance works, how it sits alongside the nil-rate bands, and the related changes that farming families are reviewing. Figures are current as at August 2026 and are subject to change.
What changed on 6 April 2026
The relief itself remains, but its shape changed. A new combined allowance now caps the amount that attracts the full 100% rate. The table below compares the position before and after the reform.
| Feature | Before 6 April 2026 | From 6 April 2026 |
|---|---|---|
| 100% relief | Available on all qualifying agricultural or business property, no upper cap | Available on the first £2,500,000 of combined qualifying property per person |
| Value above the allowance | Still 100% where conditions were met | 50% relief, so an effective 20% inheritance tax rate on that slice |
| Combining APR and BPR | Assessed separately | Share one combined £2,500,000 allowance |
| Transfer between spouses | Not framed as a transferable allowance | Unused allowance transferable, up to £5,000,000 per couple |
Source: gov.uk, reforms to APR and BPR, as at August 2026, subject to change. The £2.5m figure was confirmed in December 2025 and replaced an earlier proposed £1,000,000 allowance.
How the £2.5m allowance works
The £2,500,000 allowance is per person and covers agricultural and business property together, not one figure for each. Where an estate holds both a farm qualifying for APR and, for example, shares in a trading company qualifying for BPR, the two draw on the same allowance. Value that falls within it attracts 100% relief. Value above it attracts 50% relief, which produces an effective inheritance tax rate of 20% on that portion at the standard 40% rate.
The allowance is transferable between spouses and civil partners. Any unused portion on the first death can pass to the survivor, so a married couple or civil partners may between them shelter up to £5,000,000 of qualifying property at the 100% rate, on top of the nil-rate bands described below (gov.uk, as at August 2026, subject to change). Where a first spouse or civil partner died before 6 April 2026, the position is that a full £2,500,000 allowance is available to transfer on the later death. The detailed conditions for what qualifies as agricultural or business property are unchanged in principle and are set out in HMRC guidance (gov.uk agricultural relief guidance, as at August 2026, subject to change).
A worked example (illustration only)
How the reform sits with the nil-rate bands
APR and BPR are applied before the ordinary inheritance tax thresholds, so the nil-rate bands can still be set against value that remains chargeable, including non-farm assets such as a family home or savings. The main thresholds are frozen, which matters for farming families whose land and buildings have risen in value.
| Allowance or rate | Level (August 2026) |
|---|---|
| Nil-rate band | £325,000 |
| Residence nil-rate band | Up to £175,000 |
| Standard inheritance tax rate | 40% |
| Reduced rate (10%+ of net estate to charity) | 36% |
| Residence band taper threshold | £2,000,000 |
Source: gov.uk/inheritance-tax, as at August 2026, subject to change. The nil-rate band, residence nil-rate band and £2,000,000 taper threshold are frozen until the end of the 2030-31 tax year (5 April 2031), a freeze extended by a further year at Budget 2025 (gov.uk, Budget 2025 Overview of Tax Legislation and Rates, as at August 2026, subject to change).
The residence nil-rate band is withdrawn by £1 for every £2 by which the estate exceeds £2,000,000, so larger farming estates may lose part or all of it. Because a working farm can carry a high asset value on paper while producing a modest income, the interaction of the £2.5m relief allowance, the frozen bands and the taper is worth mapping for each family, and clear fees for that work are set out before it begins. Our general guide to inheritance tax covers the bands in more depth.
Pensions and the 2027 change
A separate change affects many estates from a later date. From 6 April 2027, most unused pension funds and death benefits are due to be brought within the value of the estate for inheritance tax, a change announced at the Autumn Budget 2024 (gov.uk, Inheritance Tax on pensions: liability, reporting and payment, as at August 2026, subject to change). For farming families who have used pensions alongside the land as part of retirement and succession planning, this is a related date to keep in view, because a pension that once sat outside the estate may in future add to the value assessed for tax.
Lifetime gifts and succession
Passing farmland down during a lifetime is one route families consider, and the ordinary gifting rules apply alongside the reliefs. Most lifetime gifts are potentially exempt transfers that fall outside the estate if the person giving survives seven years (gov.uk gifts guidance, as at August 2026, subject to change). Where death occurs between three and seven years after a gift, taper relief can reduce the tax due on the gift itself, though it reduces the tax rather than the value of the gift. Smaller exemptions also exist, including the £3,000 annual exemption and normal expenditure out of surplus income. Gifting land brings its own tax and practical questions, such as who continues to farm it, so it tends to be considered as part of a wider estate plan rather than in isolation. Setting out wishes clearly in a valid will remains the foundation; our guide on how to write a will explains the basics.
Scotland and Northern Ireland
Inheritance tax, APR and BPR apply across the whole of the UK, so the £2,500,000 allowance and the 6 April 2026 changes are the same in Scotland and Northern Ireland as in England and Wales. Succession law differs, however. Scotland has its own rules, including legal rights that can entitle a spouse and children to a fixed share of certain property, and it uses confirmation rather than a grant of probate. Farming families with land or interests in more than one UK nation may find it worth taking advice in each.