Inheritance Tax Reforms: The £1 Million Cap on Farm and Business Property Reliefs

Описание: Significant changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) for Inheritance Tax (IHT) were announced in the Autumn Budget 2024, commencing in April 2026. Historically, these reliefs allowed up to 100% of eligible assets to be exempted from IHT. The government is introducing a £1 million cap on the combined 100% relief for APR and BPR, with 50% relief applying to value above that threshold. The aim is to target a wealthy minority of estates and raise funds. However, the policy has sparked debate, with concerns raised by farming organisations about negative impacts on family businesses and the administrative complexity of the new rules.


Key Takeaways in Bullet Points

• From April 2026, the maximum value of assets eligible for 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) combined will be capped at £1 million.
• The standard Inheritance Tax rate is 40% on an estate’s value above the nil-rate band of £325,000.
• HM Revenue and Customs (HMRC) estimates that around 2,000 estates per year will pay more tax due to these reforms, assuming no changes in taxpayer behavior.
• Economic think tanks generally support the policy, arguing that assets should be taxed similarly and that existing reliefs favored certain asset types.
• Agricultural organizations argue the changes will negatively affect farming businesses, with one group claiming up to 70,000 farms could be harmed over 40 years.

Definitions

1. Inheritance Tax (IHT): A tax charged on the ‘net estate’ (assets minus debts) of someone who has died, typically at a 40% rate if the estate exceeds the £325,000 threshold.
2. Agricultural Property Relief (APR) and Business Property Relief (BPR): These are inheritance tax reliefs that shelter the value of eligible agricultural land or business assets from IHT, often at a 100% rate.
3. £1 Million Cap: The new limit, applicable from April 2026, on the combined value of assets that can qualify for 100% APR and BPR.

Source: Changes to agricultural and business property reliefs for inheritance tax (https://commonslibrary.parliament.uk/...)
Research Briefing
Wednesday, 10 December, 2025


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