APR and BPR Reform 2026: How the October 2024 Budget Changes Agricultural Property Relief and Business Property Relief
From 6 April 2026, 100% APR and BPR will be capped at a combined £1 million per estate. Above the cap, only 50% relief is available — an effective IHT rate of 20%. Farming estates, business owners, and AIM share investors need to act now to restructure before the change takes effect.
The APR and BPR Reform: What Changes
What is changing from 6 April 2026?
From 6 April 2026, the existing 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) will be subject to a combined cap. The first £1 million of qualifying APR and BPR property will still attract 100% relief — the same as now. However, the qualifying value of APR and BPR property above £1 million will only attract 50% relief. At 40% IHT, a 50% relief means an effective IHT rate of 20% on the excess above the cap. The £1 million cap is per individual — it is not transferable between spouses in the same way as the RNRB transferable allowance. Crucially, APR and BPR interact with the nil rate band: the NRB (£325,000) is used first, then APR/BPR is applied to the qualifying value of agricultural/business property. The £1 million cap applies to the 100% relief tranche of APR and BPR combined — so a farming estate with both agricultural property (qualifying for APR) and business property (qualifying for BPR) shares the single £1 million cap between the two.
Who is most affected?
The APR reform targets farming estates with agricultural property valued above £1 million. Given current UK farmland values (£8,000–£12,000 per acre in England, higher in some regions), estates of 100–125 acres or more are potentially affected. For a farming estate with £3 million of agricultural property: the first £325,000 is covered by the NRB; the next £1 million is covered by 100% APR (the cap); the remaining £1.675 million receives only 50% APR — leaving £837,500 chargeable to IHT at 40% = £335,000 of IHT. This is a dramatic change from the current position where the same estate would have near-zero IHT liability. The BPR reform targets trading business owners with company shares valued above £1 million. For unquoted trading companies — typically owner-managed businesses — the 100% BPR currently means the business can pass to children with no IHT. After April 2026, businesses worth above the £1 million cap (combined with any APR) will face 20% effective IHT on the excess.
IHT on AIM-listed shares: 100% BPR → 50% above the cap
AIM-listed shares (shares listed on the Alternative Investment Market) that qualify for BPR — generally shares in trading companies listed on AIM — currently attract 100% BPR after a 2-year holding period, with no monetary cap. From 6 April 2026, AIM shares qualifying for BPR will be subject to the same £1 million combined cap. Above the cap, only 50% BPR will apply. For investors who hold AIM portfolios specifically for IHT planning (AIM IHT ISAs / AIM IHT portfolios), this significantly reduces the tax efficiency of the strategy for larger portfolios. The first £1 million of qualifying AIM shares still attracts 100% BPR — so the strategy remains highly efficient for portfolios below £1 million. Above the cap, the effective IHT rate is 20% (50% BPR at 40% IHT).
How the £1 million cap works in practice
The £1 million cap applies to the combined value of APR-qualifying agricultural property and BPR-qualifying business property in the estate. Example 1 — mixed farming and business estate: farming land worth £1.5M (APR qualifying) + trading company shares worth £600,000 (BPR qualifying) = £2.1M total qualifying. The cap of £1M covers the first £1M of combined qualifying property. The remaining £1.1M of qualifying property receives only 50% relief. IHT: 40% × (£1.1M × 50%) = £220,000. Example 2 — farmer with only APR property: farm worth £1.5M (APR qualifying). NRB covers £325,000. APR 100% covers next £1M (the cap). Remaining £175,000 gets 50% APR: taxable value = £87,500. IHT = £35,000. Note: the NRB applies before the APR cap is calculated — so a farmer with a small NRB available (e.g. used NRB on prior gifts) will see a greater proportion of the farm exposed to the 50% relief tranche.
Instalment option on APR/BPR property after April 2026
IHT on qualifying agricultural and business property is eligible for the instalment option under s227–229 IHTA 1984: the tax can be paid in 10 equal annual instalments without interest (for agricultural land and unquoted business property). This instalment option applies to the portion of IHT that remains payable after the 50% relief above the cap. A farming estate that owes £300,000 in IHT after April 2026 can pay £30,000 per year for 10 years. The first instalment is due 6 months after death. This eases the immediate cash flow pressure on families who cannot sell or borrow against the farm to pay IHT. The instalment option remains in place after the April 2026 reform — it is not changed by the Budget.
Planning steps: what to do before and after April 2026
Before April 2026: (1) Lifetime gifts of qualifying APR/BPR property are PETs (potentially exempt transfers) — if the donor survives 7 years, the gift is outside the estate with no IHT and no APR/BPR cap applies to the gift (the cap applies at the time of the death, not the time of the gift; taper relief and PET rules apply to the gifted value if the donor dies within 7 years). (2) Spousal exemption: if the farming estate passes entirely to a spouse first, the full estate (including APR/BPR property) is exempt from IHT (spousal exemption). On the second death, the combined £1M cap applies — so spouses should consider whether structuring for two separate deaths achieves a combined £2M cap (each having their own £1M cap) or whether the transferable NRB and RNRB are more valuable. (3) Trust structures: placing APR/BPR property into a discretionary trust before death is a CLT (chargeable lifetime transfer) — subject to IHT at 20% on the entry value above the NRB. The trust can hold the property with a 10-year periodic charge at up to 6% — potentially cheaper than the 20% effective IHT rate on death above the cap. (4) Review wills and succession: if the farm currently passes to a surviving spouse and then to children, the structure may need revision to use both spouses' £1M caps.
Frequently Asked Questions
When does the APR and BPR £1 million cap take effect?
The reform takes effect from 6 April 2026. Estates where the deceased died on or before 5 April 2026 continue to benefit from unlimited 100% APR and 100% BPR under the existing rules. The £1 million cap applies only where the date of death is on or after 6 April 2026. It also applies to lifetime gifts made on or after 6 April 2026 where the donor dies within 7 years.
Is the £1 million APR/BPR cap per person or per couple?
The cap is per individual estate — there is no automatic transferability of unused APR/BPR cap between spouses. However, each spouse has their own £1 million cap. If a farming estate is structured so that each spouse owns qualifying property separately, each estate can claim the £1 million 100% relief cap on their own qualifying property. Splitting ownership between spouses (e.g. each owning £1.5 million of farmland rather than one owning £3 million) can double the effective cap to £2 million in the estate. Specialist advice is essential before restructuring ownership.
What happens to farming estates that pass to a surviving spouse?
The spousal exemption means the transfer to a surviving spouse is entirely free from IHT — the APR/BPR reform does not affect the spousal exemption. All qualifying property passes to the surviving spouse IHT-free. On the surviving spouse's death, the £1 million cap applies to their own estate. The total 100% relief available across both deaths depends on the estate structure — if the whole farm passes to the surviving spouse and then to children, only one £1 million cap is used. If the farm is structured so each spouse holds qualifying property separately, both caps are used on both deaths.
Do AIM shares still qualify for IHT relief after April 2026?
Yes — AIM shares in qualifying trading companies still attract BPR after a 2-year holding period. Up to £1 million of qualifying AIM shares (combined with any other APR/BPR qualifying property) receives 100% BPR — full relief with no IHT. AIM shares above the combined £1 million cap receive 50% BPR — an effective IHT rate of 20% on the excess. For investors with AIM IHT portfolios below £1 million, the strategy is largely unchanged. For larger AIM portfolios, the excess above the cap is no longer fully IHT-free.
Can the IHT on a farm be paid in instalments after April 2026?
Yes. The instalment option under s227 IHTA 1984 allows IHT on qualifying agricultural property (and unquoted business shares) to be paid in 10 equal annual instalments. Interest-free for land and unquoted company shares. The first instalment is due 6 months after the date of death. For a farming estate facing £300,000 IHT after April 2026, the family can pay £30,000 per year for 10 years — maintaining the farm without needing to sell land immediately to pay IHT.
What should farmers do now to prepare for the April 2026 APR reform?
Key actions: (1) Review the farm's current value and the amount of qualifying property above the £1 million cap. (2) Consider lifetime gifts of qualifying farmland or business property as PETs — the 7-year clock starts and the value of qualifying property transferred in lifetime is outside the estate cap if the donor survives 7 years. (3) Review the current will and succession structure — ensure both spouses' £1 million caps can be used by appropriate splitting of qualifying asset ownership. (4) Consider life insurance written in trust to fund the IHT liability that will arise on the second death. (5) Explore trust structures for the excess above the cap. (6) Make sure current wills are up to date and correctly direct the farm to the next generation.
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