Inheritance Tax: Planning considerations for businesses around the new £2.5m APR/BPR threshold

Over the last year, farmers, landowners, and business owners have been lobbying against the proposed changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) for Inheritance Tax (IHT). 

Finally, on 23rd December 2025, the Government announced that, from 6 April 2026, the transferable APR/BPR allowance would be £2.5 million (or £5 million for a married couple or civil partners). 

Whilst this increased figure is welcome, some people still face the prospect of significant IHT liabilities on their death.  Careful planning can help reduce their tax exposure and protect more wealth for their family.

Why are the changes to APR and BPR important? 

APR and BPR reduce the amount of IHT that farmers, landowners, and business owners pay when they pass qualifying assets to the next generation.  However, not all land or agricultural/business assets qualify for relief, so specialist advice to maximise these important IHT protections is crucial. 

You need to know what assets qualify for relief, how business debts and liabilities affect the calculation, the impact of any non-qualifying assets etc and carefully consider the timing and structuring of any asset transfers.  

Until 6 April 2026, farmers, landowners, and business owners can pass/transfer an unlimited amount of qualifying APR/BPR assets to the next generation IHT-free.  Expert advice on how to do this is essential – if not, other tax liabilities could be triggered (e.g. Capital Gains Tax). 

From 6 April 2026, IHT at 20% will be payable on APR/BPR assets over the £2.5 million allowance. 

What this means for Inheritance Tax planning 

The APR/BPR allowance reduces the potential IHT burden for many families, but it doesn't eliminate the need for proactive planning. You should consider these key points: 

1. Act before 5 April 2026: The new rules take effect from 6 April 2026. There may be planning opportunities available before this date that could help mitigate the impact of the incoming changes/restrictions.  
2. Review your business structure: The way your business is structured can significantly impact the reliefs available. Consider whether your current structure optimises your position under the new rules. 
3. Obtain a current valuation: Understanding the accurate value of your business and qualifying assets is crucial and the first step in effective planning. 
4. Consider lifetime gifts: Strategic lifetime gifting of assets may still play a role in succession planning, though this must be balanced against your need to maintain control and/or derive income during your lifetime. 
5. Succession beyond tax: Whilst tax is an important consideration, successful succession planning also addresses who will run the business/farm, when and how they should take control etc and, where necessary, balance fairness between family members.  

Time to act now 

The new APR/BPR restrictions come into effect from 6 April 2026, and IHT pension reforms are to be introduced from 6 April 2027 (when the value of unused pension funds and pension death benefits will be included in your estate with IHT payable at 40%). 

This all means that more assets/wealth will be subject to tax.  Proper structuring to protect your wealth/legacy takes time – so anyone wanting to consider succession and/or pension planning should act now.