Navigating the new inheritance tax relief thresholds

The end of 2025 brought an important development for farmers and business owners facing increased inheritance tax exposure as a result of previous budget announcements.

The Government has confirmed that, from 6^th April 2026, the rules surrounding Agricultural Property Relief (APR) and Business Property Relief (BPR) will change, with IHT free thresholds increasing.

A higher threshold: £2.5 million for 100% relief

Originally, proposals suggested that 100% relief for qualifying assets would be capped at £1 million. Following extensive feedback from the farming community, family businesses, and professional advisors, the Government has increased this cap to £2.5 million. For couples, this effectively means that up to £5 million of qualifying agricultural or business assets can be passed on entirely free of inheritance tax, over and above existing allowances like the nil-rate band.

Trusts will see corresponding increases, with the 100% relief allowance also raised to £2.5 million, ensuring consistency between personal and trust holdings.

How the relief works under the new rules

APR and BPR have long been essential tools for succession planning. In brief:

• Business Property Relief (BPR) helps families preserve trading businesses, unquoted company shares, or qualifying investments without triggering large inheritance tax bills.
• Agricultural Property Relief (APR) enables the transfer of farmland and related property either during a lifetime or on death, subject to minimum ownership or farming periods.

Under the new system:

• Assets qualifying for 100% APR or BPR relief up to £2.5 million will remain fully exempt from inheritance tax.
• Qualifying assets above this threshold will receive 50% relief, creating an effective inheritance tax rate of 20% on the excess.
• Lifetime gifting allows the £2.5 million allowance to refresh every seven years, while trust allowances refresh every ten years. These thresholds will also adjust with inflation starting April 2031, subject to future Government approval.

Key considerations for families and business owners

These revisions require careful planning – here are some points to keep in mind:

1. Timing of gifts – Gifting assets before April 2026 may allow more flexibility, as transfers are not immediately limited by the new threshold. After 6^th April 2026, any lifetime gift will reduce the 100% relief allowance if death occurs within seven years.
2. Spousal transfers – Unused relief can still be transferred between spouses or civil partners, even if the first death occurs before April 2026. However, the surviving partner must satisfy any qualifying periods for the asset themselves.
3. Company shares – Investments in AIM-listed companies or EIS shares listed on AIM will generally only qualify for 50% relief under the new rules, so careful structuring may be necessary.
4. Funding inheritance tax – Even with relief, families should consider funding potential inheritance tax liabilities. Options include life insurance policies held in trust to cover future liabilities.
5. Succession planning – With the threshold increase, there may be opportunities to advance succession plans, involve family members earlier, or strategically gift qualifying assets while considering other tax implications such as capital gains tax.

The Verallo perspective

The message is clear – now is the time to review existing succession and tax plans. The increased relief threshold offers significant opportunities, but careful planning remains essential to maximise the benefits.

Our advice remains to approach these changes proactively, considering both lifetime and post-mortem strategies. Working closely with professional advisers ensures that families can navigate the rules efficiently while preserving generational wealth.

Get in touch

If you would like to understand how these changes may affect your business, farming interests or estate planning, the Verallo tax team can assist with reviewing existing arrangements and advising on appropriate next steps.

Please contact our tax team to discuss your circumstances in more detail by emailing info@verallo.com or calling 0203 912 9933.