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Agricultural Property Relief Budget 2024 UK: The £1 Million Cap from April 2026

Updated 31 May 2026 · 9 min read · Inheritance Tax & Agricultural Estates

The October 2024 Autumn Budget fundamentally changed agricultural and business property relief. From 6 April 2026, a £1 million combined cap on 100% APR/BPR means that significant farming estates will face an effective IHT rate of 20% on assets above the threshold for the first time. Farming families must act urgently.

The Pre-Budget Position

Before October 2024, agricultural property qualifying for APR under IHTA 1984 ss.115–124C attracted 100% relief — meaning the entire agricultural value was exempt from IHT, regardless of how large the farm was. Similarly, qualifying business property attracted 100% BPR under IHTA 1984 ss.103–114. A farming estate worth £5 million or £50 million could be passed entirely free of IHT, provided the assets qualified.

This positioned the UK as one of the most generous jurisdictions in the world for agricultural succession. The October 2024 Budget ended that era.

The New Rules from 6 April 2026

From 6 April 2026:

  • Up to £1 million of combined APR + BPR qualifying property → 100% relief (no IHT)
  • Above £1 million of combined qualifying property → 50% relief (effective IHT rate: 20%)
  • Cap is per person — not transferable between spouses in the way the nil-rate band transfers
  • APR at 50% rate (let agricultural land) — unaffected by the new cap structure but subject to existing IHTA rules

How the Cap Works With Other IHT Reliefs

The £1 million APR/BPR cap operates alongside (not instead of) the nil-rate band and RNRB. For a farmer dying in 2026/27:

  1. Nil-rate band: £325,000 at 0% IHT
  2. RNRB (if the farmhouse qualifies): up to £175,000 at 0% IHT
  3. APR/BPR cap: up to £1 million of qualifying property at 0% IHT (100% relief)
  4. APR/BPR above cap: at 50% relief → effective 20% IHT rate on the excess

Combined for a single farmer: potentially £1.5 million of assets sheltered from IHT (nil-rate band + RNRB + £1m cap) — but a farm worth £3 million could still face an IHT bill of approximately £300,000 or more, depending on the estate composition.

Immediate Planning Priorities

1. Review Your Will

Wills drafted before October 2024 may be based on the assumption of full APR/BPR exemption. Review whether your current will optimises the allocation of assets between spouses to access both individuals’ APR/BPR caps and nil-rate bands. A farm of £2 million split between two spouses on death may access £2 million in combined APR/BPR at 100% — double the cap of a single-ownership estate.

2. Consider Lifetime Transfers

A gift of qualifying agricultural property during the donor’s lifetime benefits from APR/BPR at the date of the gift. If the donor survives 7 years, the gift becomes a completely exempt PET. Lifetime planning options must be pursued carefully (genuine transfer with full gift, not continued use by the donor under GROB rules) but may be significantly more attractive post-Budget 2024.

3. Life Insurance

A whole-of-life policy written in trust to cover the anticipated IHT liability provides a clean, funded solution. For farming estates, the IHT charge is now predictable (20% on excess above £1 million cap plus any general estate above the nil-rate band) — making insurance-based solutions viable.

4. Instalment Payments

IHT on qualifying agricultural and business property can be paid by annual interest-free instalments over 10 years under IHTA 1984 s.227, provided the farm is retained. This spreads the liability and avoids forced sale, but the IHT must still be paid — it is not deferred indefinitely.

FAQs

What did the October 2024 Budget change about agricultural property relief?

The Autumn Budget 2024 (presented by Chancellor Rachel Reeves on 30 October 2024) announced a fundamental change to agricultural property relief (APR) and business property relief (BPR) taking effect from 6 April 2026. Under the new rules: (1) APR and BPR will be capped at £1 million combined at 100% relief — meaning the first £1 million of combined agricultural and business property in an estate attracts the current full relief with no IHT due. (2) Agricultural and business property above the £1 million combined cap will attract 50% relief rather than 100% relief — meaning 50% of the value above the cap is chargeable to IHT at the standard 40% rate. The effective IHT rate on value above the cap is therefore 20% (50% of 40%). (3) The cap is per person per estate — a surviving spouse can have their own £1 million cap on their death, but there is no transferable mechanism for the APR/BPR cap between spouses in the way the nil-rate band and RNRB transfer. (4) APR on let agricultural land currently qualifying at 50% relief (not 100%) remains at 50% and is not affected by the new cap structure in the same way.

Who is affected by the April 2026 APR/BPR cap?

The April 2026 cap primarily affects: (1) Farming families with farms worth more than £1 million — particularly families owning the farmland outright (agricultural value above the nil-rate band and RNRB will now be subject to 20% IHT on the excess). (2) Business owners with business property worth more than £1 million — partnerships, sole traders, and company shareholders whose shares or interests qualified for 100% BPR. (3) Estates that rely on a combination of APR and BPR — the combined cap means that, for example, a farmer who also owns business property will exhaust their £1 million cap across both reliefs together. (4) Landowners who let agricultural land at full agricultural tenancy rates qualifying for APR at 100%. Small farms worth less than £1 million of agricultural value (after the nil-rate band of £325,000 and potentially the RNRB of £175,000) may still owe little or no IHT if total estate value is modest. However, for most significant farming estates — particularly those in the South East and East of England where land values have risen sharply — the new rules will impose a material IHT charge.

How is the £1 million cap calculated alongside the nil-rate band and RNRB?

The £1 million APR/BPR cap operates separately from the IHT nil-rate band (£325,000) and residence nil-rate band (RNRB, up to £175,000). When calculating IHT on an estate after April 2026: (1) Apply the nil-rate band (£325,000) — estate assets up to this amount are charged at 0%. (2) Apply the RNRB (up to £175,000) — a qualifying residential interest passing to direct descendants; a further nil-rate band. (3) Apply the APR/BPR £1 million combined cap — up to £1 million of agricultural and business property qualifying for 100% relief has no IHT (effectively a nil rate on those assets). (4) APR/BPR above £1 million — 50% relief, so the effective IHT rate on the excess is 20%. Example: a farmer dying in 2026/27 with a farm worth £3 million, no other assets, and qualifying for APR at 100%. The nil-rate band (£325,000) is applied first. The RNRB may apply if a farmhouse qualifies as a residential interest passing to children (£175,000). The £1 million APR cap shelters the next £1 million. The remaining £1.5 million (approximately) attracts APR at 50% — so £750,000 is chargeable at 40% IHT = £300,000. Before April 2026, the entire farm would have been exempt.

Are there any reliefs or planning options to mitigate the new APR/BPR cap?

Planning options to consider following the October 2024 Budget changes: (1) Lifetime transfers — gifting business or agricultural property during lifetime uses the individual's own nil-rate band and, if the gift qualifies for APR/BPR at the time of the gift, the relief applies at the date of gift (not death). After 7 years, a potentially exempt transfer (PET) becomes completely exempt. However, a 7-year survival period is required and the donor must genuinely give up the property. (2) Will restructuring — ensuring the estate plan takes full advantage of both spouses' APR/BPR allowances, nil-rate bands, and RNRB. The £1 million cap is per person — a properly structured farming couple can access £2 million in combined APR/BPR at 100%. (3) Life insurance — life assurance written in trust to fund the IHT liability, particularly effective for predictable farming estate values. (4) EIS/SEIS investments or other BPR-qualifying assets — using BPR-qualifying investments for non-agricultural wealth to preserve the APR cap for farm assets. (5) Instalment payments — IHT on agricultural and business property can be paid by instalments over 10 years (interest-free on qualifying agricultural property), which reduces immediate cash flow pressure. Note: HMRC has indicated transitional arrangements, and professional advice is essential given the complexity and the magnitude of the change.

What is the instalment option for IHT on agricultural property?

Under IHTA 1984 ss.227–229, IHT on certain assets — including agricultural property qualifying for APR and business property qualifying for BPR — can be paid by annual instalments over 10 years, rather than as a single payment 6 months after death. Key features: (1) The option to pay by instalments must be elected on the IHT400 return at probate. (2) On qualifying agricultural property, the instalments are interest-free (unlike most instalment options which attract interest). (3) The asset must be retained by the estate for the instalment period to remain interest-free — if the farm is sold before all instalments are paid, the remaining IHT becomes payable immediately. (4) Where post-April 2026 APR is limited to 50% above the £1 million cap, the IHT due on the excess qualifies for the instalment option, making it more manageable for farming families that wish to retain the farm in the family. The instalment option significantly reduces the immediate cash pressure of an IHT charge on a farming estate — the family does not need to sell the farm to pay IHT, provided they can service the annual instalment payments from farm income.

Should farming families urgently review their wills following the Budget 2024 changes?

Yes — farming families and rural business owners should review their estate planning and wills urgently. Key reasons: (1) The April 2026 start date means the clock is running — estates of persons who die on or after 6 April 2026 will be subject to the new cap. (2) The change fundamentally alters the IHT position of estates that previously relied on full APR/BPR exemption. (3) Will structures drafted before the Budget may be based on the assumption of full APR/BPR relief and may not allocate assets optimally given the new cap. (4) Lifetime planning options (PETs, trusts, business reorganisations) may need to begin immediately to secure existing APR/BPR before the cap takes effect. (5) The nil-rate band, RNRB, and APR/BPR cap need to be modelled together for each couple's specific estate — the planning is highly fact-specific. Agricultural solicitors and specialist estate planning tax advisers are essential for any farming estate worth more than £1 million. The Budget 2024 changes represent the most significant reform to agricultural IHT relief since APR was introduced in 1984.

Update Your Farming Succession Plan Now

The April 2026 APR/BPR cap is the most significant IHT change for farmers in 40 years. Your will and succession plan need urgent review. WillSafe’s DIY will kit helps put a valid personal will in place quickly — but for farming estate succession planning, specialist agricultural and tax solicitors are essential to model the new rules for your specific estate.

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