Agricultural Property Relief (APR) and Business Property Relief (BPR) are long‑standing inheritance tax (IHT) reliefs designed to protect productive assets from punitive tax charges on death or certain lifetime transfers.
APR can reduce the value of qualifying agricultural property for IHT purposes, typically by up to 100% in many cases, ensuring farms and farmland can pass between generations without forcing a sale to meet tax liabilities.
BPR performs a similar role for trading businesses and interests in trading companies, allowing family businesses to be transferred without destabilising their operations due to IHT.
Both reliefs are central to many estate planning strategies. They influence how land, farmhouses, partnerships, company shares and business assets are owned and transferred, and how wills and succession plans are structured.
- What has Changed
Recent reforms have adjusted the scope and conditions for both APR and BPR. The key themes are tightening eligibility, clarifying grey areas and introducing additional conditions intended to target reliefs. The main updates are:
Qualifying use: The rules now place greater emphasis on the actual commercial use of land and business assets. Passive or largely investment‑focused use is less likely to qualify for relief. There is an increased focus on demonstrable agricultural use and, where relevant, the integration of diversified activities with a genuine farming enterprise in order to be eligible for APR. For BPR, trading status tests have been refined to exclude companies with substantial non‑trading activities.
Ownership and occupation periods: Minimum ownership and occupation periods have been clarified and, in some cases, extended. Evidence of continuous qualifying use during the relevant period is now more important, with stricter record‑keeping expectations.
Farmhouses and ancillary property: The criteria for farmhouses to qualify for APR have been tightened, with closer scrutiny of whether a dwelling is of a character appropriate to the agricultural land and used as part of the working farm. Ancillary buildings and diversified facilities will be assessed by reference to their role in, and necessity for, the agricultural operation.
Diversification and environmental schemes: New conditions recognise certain environmental land management and stewardship activities but require proof that such use forms part of a qualifying agricultural or trading purpose rather than a purely passive subsidy or investment. Mixed‑use and diversified estates face a more granular, asset‑by‑asset analysis.
Partnerships and corporate structures: Documentation and accounts must evidence that assets claimed for APR or BPR are partnership or company assets used in the trade, not merely held personally or for investment. For BPR, further tests will apply to Business Interest held in a Group structure, with stricter treatment of surplus cash and investment portfolios.
Thresholds, rates and interaction with other reliefs: The core relief rates remain available where conditions are met, but the interaction with other reliefs and exemptions has been clarified, reducing scope for double counting.
Pre April 2026, APR and BPR would attract a 100% exemption on qualifying assets, with no upper limit.
From April 2026, APR and BPR will only attract a 100% exemption on qualifying assets up to the value of £2.5m (as increased by announcement 23rd December 2025). Thereafter IHT will become payable at a rate of 20% of all remaining qualifying assets. This IHT liability will need to be paid within 10 years for the date of death, otherwise interest will become due on the unpaid sums.
The value of an individual’s 100% exemption, if unused in full on death, can be transferred and added to the available exemption of a surviving spouse/civil partner. Allowing surviving spouse/civil partners’ available APR / BPR exemption to potentially increase to £5m.
Compliance and evidential standards: HMRC expects contemporaneous records demonstrating qualifying use, occupation, trading activity and decision‑making. Valuation approaches for mixed assets and apportionments have been set out in more detail, and late or incomplete evidence is more likely to be challenged.
- Potential Impact on Individuals and Businesses
These changes will affect farmers, landowners, family‑owned companies and shareholders in trading groups.
For agricultural estates, the tighter approach to farmhouses, diversified income and environmental schemes may reduce the proportion of value qualifying for APR unless day‑to‑day agricultural use is clearly evidenced. Those with let land, contract‑farming arrangements, or significant non‑farming income may face increased scrutiny and potentially lower relief.
For business owners, refined trading tests could limit BPR where there are material investment activities, surplus cash holdings or non‑trading subsidiaries. Group structures with property or investment arms may need rebalancing to preserve trading status. Minority shareholders in trading companies should also review whether changes to activity mix or cash levels could affect eligibility.
Generally, estate plans that previously relied on broad interpretations of “trading” or “agricultural” use may no longer yield the same IHT outcome. Valuation and evidential issues will be more prominent, and HMRC enquiries may become more frequent.
- Practical Steps to Consider
You should take stock early and consider restructuring to ensure that estate plans fit the new rules.
- Audit qualifying status: Review each asset class against the updated conditions. For farms, assess occupation, use and integration of diversified activities. For businesses, test the trading status at company -, including the impact of cash and investments.
- Strengthen records: Keep detailed evidence of agricultural and trading activities, including agreements, management records, stocking levels, cropping plans, invoices, and partnership or board minutes showing business use and decision‑making.
- Review structures: Check whether key assets are held in the correct entity. Consider moving operational assets into the trading partnership or company where appropriate, and ring‑fencing investment activities to protect trading status.
- Revisit succession plans and Wills: Ensure that legacies and asset allocations align with ongoing eligibility. Consider whether life assurance, trusts, or staged transfers could mitigate risk while maintaining control and operational continuity.
- Manage cash and investments: Evaluate surplus cash levels and investment portfolios within trading companies. Consider capital expenditure or distributions where commercially justified to avoid tipping into non‑trading status.
- Check agreements: Review tenancy, grazing, contract‑farming and share‑farming agreements to confirm that they support qualifying occupation and use under the revised rules.
- Timing and transitional rules: Identify any windows to complete reorganisations or transfers under transitional provisions.
In Summary
APR and BPR remain valuable tools for protecting farms and family businesses from inheritance tax, but the recent changes to the law mean that farmers and business owners should review their arrangements. Many existing arrangements will continue to qualify for relief, but assumptions that previously went untested may no longer hold.
If you own agricultural land or a trading business, or if your estate plan relies on APR or BPR, you should seek tailored advice. A focused review can identify risks, secure available relief, and, where necessary, adjust your structure and records to meet the updated conditions. For further guidance or a confidential review of your position, please contact us.
To ensure maximising your entitlement to APR /BPR, early consideration of your circumstances, farm management, business structures and succession plans is essential to avoid unnecessary Tax burdens on death.
Janelle Carter-Jones and Rob Evans are Associate Solicitors in our Wills & Probate Department with significant experience in dealing with complex estate planning. Please contact either Janelle or Rob to discuss APR/BPR and IHT planning.
 |  | |||
| Tel: 01792 277853 / 07398 097795 [email protected] | Tel: 01792 277854 / 07398 098103 [email protected] |
