For farming families and family-owned businesses, passing assets on to the next generation has become more complicated following changes to Inheritance Tax (IHT) reliefs.

Agricultural Property Relief (APR) and Business Property Relief (BPR) have historically played an important role in helping families pass farms and businesses on without a significant IHT bill. However, changes introduced from 6 April 2026 have restricted the amount of qualifying assets that can benefit from 100% relief.

With many farming businesses also facing rising costs and changing sources of income, succession and IHT planning is becoming increasingly important.

What has changed?

Previously, qualifying agricultural and business assets could benefit from 100% APR or BPR without an overall limit.

From 6 April 2026, 100% relief is available on up to £2.5 million of qualifying APR and BPR assets per individual or trust. Qualifying assets above this threshold can still benefit from relief, but at a reduced rate of 50%.

This means that estates with significant farmland, agricultural buildings or qualifying business assets may now face an IHT liability where there was previously little or no tax to pay.

The changes make it particularly important for farming families and business owners to review how their assets are owned, how they will be passed on and how any potential IHT liability could be funded.

Should you sell farmland or business assets?

With APR and BPR now restricted, some families may be considering selling qualifying assets and investing the proceeds elsewhere.

However, selling is not necessarily the best solution.

APR and BPR can still provide valuable IHT relief. Qualifying assets above the £2.5 million threshold can potentially benefit from 50% relief, meaning they are effectively subject to IHT at 20%, rather than the standard 40% rate.

There may also be Capital Gains Tax (CGT) implications to consider. Assets retained until death generally benefit from a CGT uplift to their market value at the date of death. Selling assets during the owner's lifetime could mean losing this potential benefit.

Changes to the farming business should also be considered carefully. For example, BPR generally requires a business to be wholly or mainly a trading business, so changing the nature of the business or diversifying into investment activities could affect the availability of relief.

Before selling or restructuring agricultural or business assets, professional advice should be taken to understand the wider tax implications.

Making the most of the £2.5 million allowance

The £2.5 million allowance can be transferred between spouses and civil partners, in a similar way to the Nil Rate Band.

This means that where one spouse does not use their full allowance, the unused amount can potentially be transferred to the surviving spouse.

For example, where both spouses have qualifying assets and one dies without using their full £2.5 million allowance, the survivor may potentially have up to £5 million of qualifying assets covered by the 100% relief allowance on their death.

This makes the ownership of APR and BPR assets an important consideration when reviewing succession plans.

The ages and circumstances of both spouses may also be relevant. In some situations, it may be appropriate to consider transferring qualifying assets between spouses during their lifetimes, followed by gifting some or all of those assets to the next generation.

However, lifetime gifts need careful planning, particularly because of the seven-year rule for IHT.

Could a Will help?

Wills are another important part of IHT planning.

One option for some families may be to leave APR and BPR assets to a separate discretionary trust rather than leaving them directly to a surviving spouse.

This can provide greater flexibility over how assets are distributed between family members and may help prevent qualifying assets being mixed with other assets when the relief is calculated.

The way the Will is drafted is important. Where this type of planning is being considered, the APR and BPR assets should be specifically identified rather than simply forming part of the residue of the estate.

There are also provisions that can allow certain changes made by trustees within two years of death to be treated as though they were made by the deceased's Will. However, the interaction between these rules and the APR/BPR allowance can be complicated.

For larger farming estates and family businesses, specialist legal and tax advice should therefore be taken when reviewing or updating a Will.

Planning for the IHT bill

Even where APR or BPR reduces the amount of IHT payable, families should consider how any tax bill would actually be funded.

This is particularly important for farming businesses, where a large proportion of the estate may be tied up in land, buildings, livestock or machinery rather than cash.

Possible liquidity planning could include:

• setting aside cash or other liquid investments;
• considering life insurance to provide funds towards a potential IHT liability;
• reviewing how assets are owned;
• considering whether assets could be transferred or sold without disrupting the wider business; and
• making use of the instalment option where available.

Paying IHT in instalments

APR and BPR assets can generally qualify for the option to pay IHT in 10 equal annual instalments.

This can be particularly helpful for farming families who want to continue operating the business rather than having to sell land or other assets immediately to meet an IHT bill.

The government has also confirmed that interest will not be charged on the outstanding IHT relating to qualifying APR and BPR assets while the instalment option is being used.

This can make instalment payments a useful part of the cash-flow planning process.

Why early planning matters

The changes to APR and BPR mean that succession planning for farms and family businesses is no longer simply a question of whether an asset qualifies for relief.

Families now need to consider how much relief is available, who owns the assets, how they will be passed on, what happens if assets are sold and how any resulting IHT liability could be funded.

There may be several planning options available, from reviewing ownership between spouses and updating Wills to considering trusts, lifetime gifts and liquidity arrangements.

The most appropriate approach will depend on the individual circumstances of the family and the business.

If you own a farm or family business and are concerned about how the changes to APR and BPR could affect your succession plans, now is a good time to review your arrangements and take professional advice.

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