How new inheritance tax rules could affect farmers and agricultural landowners

The government’s changes to inheritance tax relief came into effect on 6 April 2026, introducing a new capped system for agricultural property relief (APR) and business property relief (BPR).

These reliefs were put in place to support farming families, and for generations they have helped farms pass smoothly from one owner to the next. Now that they’re in place, now’s a good time for farmers and landowners to review their plans and to understand how these new limits might apply to them.

At Everywhen, we’re here to help you understand these changes so that you can get prepared in advance. In this article, we explore what’s changed, who has been affected and how you can react with confidence.

Agricultural property relief (APR) is an inheritance tax relief that reduces the amount of tax that must be paid when farmland is passed on to the next generation.

Business property relief (BPR) works in a very similar way but applies to any qualifying business assets within an estate.

Under the reforms, the full 100% rate of relief applies only to the first £2.5 million of qualifying agricultural and business assets. Any value above that will qualify for 50% relief instead. The government says that most farming estates haven’t been affected, as around 85% of estates claiming APR will not pay additional tax under the new rules; larger farms and landholdings are more likely to feel the impact.

In December 2025, HM Revenue and Customs (HMRC) estimated that around 1,100 estates would pay more tax following the changes.

APR and BPR have never had an upper limit before, which meant that many farms and landholdings could pass between generations without a tax charge. Introducing a cap is a notable change, particularly as a large share of APR has historically been claimed on assets worth more than £1 million. It’s a shift that may prompt some landowners to take a closer look at how their assets are structured, but most will continue to benefit from these valuable reliefs.

The budget also outlined new plans to incorporate any unused pension funds in a deceased’s estate starting in April 2027, meaning that this will impact the overall estate value and potential IHT bill.

These and other rising asset values meant that in the 2024/25 tax year IHT receipts totalled £8.25 billion. This is an increase from £7.5 billion in 2023/24 and is forecast to reach £14.5bn by 2030/31.

Inheritance tax is usually due within six months of death, after which interest is imposed, even where the bill is eligible for a 10‑year instalment plan due to the assets in consideration. This is against the backdrop of current timescales for probate to be granted, which are reported to be between 12–14 weeks.

Effective planning can help ensure that beneficiaries don’t have to sell off assets to pay it.

Farmers and landowners can account for the APR and BPR changes by taking a fresh look at how their estates are currently valued and structured. Understanding how your farmland, buildings and business assets are held and how they may qualify for full or 50% relief can help you feel more informed as you plan.

Any unused IHT allowance passes naturally between spouses or civil partners, so where a couple are married and the estate doesn’t exceed these amounts, the IHT bill could only become due on the second death.

Gifting assets may be an alternative tax mitigation strategy, although this carries conditions including that you cannot continue to benefit from the gift. You must also survive seven years after gifting the asset for it to be completely free of potential IHT. Before that, the asset is classed as a potentially exempt transfer and is subject to a tapering rate of tax for the seven-year period. There may also be capital gains tax applicable to a gift out of the estate.

This seven‑year period is where insurance can play a practical role. Speaking to a business protection adviser could provide options for mitigating the tax that could become due if IHT becomes payable during that timeframe. It’s important to seek professional advice.

A suitably structured life insurance policy can also be used to pay the IHT bill. There are many aspects to consider in setting up a policy, such as whether it should sit within a trust and the potential impact of any periodic or exit charges, so a conversation with an adviser is essential.

Splitting the farm between multiple owners could increase the IHT relief as each owner gains their own tax‑free threshold; however, this can be complex and there is current uncertainty regarding whether this strategy will be viable under the new rules.

Alternatively, landowners may in some circumstances be able to pursue heritage status or, where location permits, designation as an area of outstanding natural beauty. These options come with strict criteria, such as ensuring public access, and will not be appropriate for most farms.

Speaking with your accountant or adviser now can also give you a clearer picture of whether your estate sits above the new threshold, especially as many APR claims have historically involved assets worth over £1 million. Taking time to review your situation now can help you adjust long‑term plans, make confident decisions and ensure your succession arrangements continue to support your family and your land for the years ahead.

Now that these changes are in place, it’s a good time to make sure that every part of your farm – from your land and buildings to your machinery and livestock – is protected in the right way.

After working closely with agribusinesses of all kinds over the years, our dedicated farm team understand the risks and realities that you face. If you’d like to review your cover, talk through what the APR reforms mean for your business or simply make sure your insurance still reflects what you need, our specialists are here to help.

Just visit our farm page here.

Sources:

https://commonslibrary.parliament.uk/research-briefings/cbp-10181/

https://www.gov.uk/government/news/what-are-the-changes-to-agricultural-property-relief