HM Treasury and Defra have confirmed that the unused £1 million allowance for Agricultural Property Relief (APR) and Business Property Relief (BPR) will be transferable between spouses and civil partners. Announced at Budget 2025 and set to apply from deaths on or after 6 April 2026, the change aligns the treatment of APR/BPR with the Inheritance Tax (IHT) nil‑rate band and residence nil‑rate band. The update applies to widows and widowers even where the first death occurred many years before 6 April 2026, providing access to a combined £2 million APR/BPR allowance on second death. HM Treasury published the revision on GOV.UK on 26 November 2025.
From 6 April 2026, the structure of APR/BPR shifts to a two‑tier model: up to £1 million of combined qualifying agricultural and business property in an estate remains relieved at 100%, with qualifying value above that receiving 50% relief. On the portion relieved at 50%, the effective IHT rate falls to up to 20% rather than 40%. The government also confirms that IHT arising on APR/BPR‑qualifying property can be paid by equal annual instalments over 10 years on an interest‑free basis from the same date.
HM Treasury’s distributional analysis indicates the policy targets larger estates. For 2026 to 2027, up to 375 of the wealthiest estates claiming APR, including those also claiming BPR, are now expected to pay more IHT than under the pre‑Autumn Budget 2024 regime. Because the £1 million allowance becomes transferable, 190 estates are expected to benefit relative to the previous design announced in 2024: 60 pay no additional tax and 130 pay less additional tax. Almost three‑quarters of estates claiming APR (including those that also claim BPR) are not expected to pay more tax based on the latest data.
Core IHT allowances continue alongside APR/BPR. Each individual retains the £325,000 nil‑rate band and may qualify for up to £175,000 residence nil‑rate band when passing a main residence to a direct descendant, although the residence band is tapered for estates above £2 million. Full exemption for transfers between spouses and civil partners is unchanged. Taken together, these rules determine how much value can be passed without IHT in typical farm and rural business successions.
Worked example: a surviving spouse or civil partner who owns a farm inherits unused allowances from the first spouse. With the Budget 2025 change, the survivor can access up to £2 million of APR/BPR at 100% relief (£1 million personal allowance plus £1 million transferred), in addition to a combined £650,000 nil‑rate band if the first spouse left everything to the survivor. In round terms this permits up to £2.65 million to pass free of IHT on the survivor’s death, subject to the residence nil‑rate band taper and estate composition.
Worked example: two joint owners passing a farm to a direct descendant can transfer up to £3 million free of IHT when combining each person’s £1 million APR/BPR allowance with their standard £500,000 tax‑free thresholds (£325,000 nil‑rate band plus £175,000 residence nil‑rate band). If leaving the assets to someone other than a direct descendant, the residence band does not apply, reducing the tax‑free total to £2.65 million.
Worked example: a single owner leaving a farm to a child or grandchild can pass up to £1.5 million free of IHT, combining the £1 million APR/BPR allowance with the £325,000 nil‑rate band and up to £175,000 residence nil‑rate band. If the beneficiary is not a direct descendant, the absence of the residence band reduces the tax‑free total to about £1.325 million.
Other reforms announced alongside the allowance include changes to BPR for market‑traded but not “listed” shares. From 6 April 2026, shares admitted to trading on recognised exchanges but not listed (for example, many AIM securities) will attract 50% BPR in all cases rather than 100%. The government has stated that the 100% or 50% rates already applicable to other categories of agricultural and business property continue as before up to the £1 million threshold.
Technical detail published by HMRC confirms how the £1 million allowance operates across an individual’s estate and lifetime transfers. The allowance covers qualifying property on death, failed potentially exempt transfers and chargeable lifetime transfers such as gifts into trust. It is applied proportionately where both APR and BPR assets qualify, and for individuals it refreshes on a rolling seven‑year basis. Anti‑forestalling rules capture post‑30 October 2024 lifetime gifts where death occurs on or after 6 April 2026.
Trusts remain within scope. A separate £1 million allowance applies to relevant property trusts at each 10‑year anniversary and on exit charges, with proposals to divide allowances where multiple trusts are created on or after 30 October 2024 by the same settlor. HMRC’s consultation outcome (21 July 2025) also confirms that, from 6 April 2026, the option to pay IHT attributable to APR/BPR‑qualifying property by equal annual instalments over 10 years will be made available interest‑free in all cases, with the option ceasing if the property is sold.
Practitioners should note that the spouse transferability announced at Budget 2025 supersedes earlier technical material which had indicated the allowance would not be transferable. HM Treasury’s 26 November 2025 update presents the latest position on transferability, while HMRC’s July 2025 consultation outcome remains the primary source on trust mechanics, anti‑fragmentation and instalment payments. Reading both together provides the full picture of the post‑April 2026 regime.
The reforms were framed by HM Treasury as a way to protect smaller family farms while ensuring larger estates contribute more. Data published at Autumn Budget 2024 show that the largest 117 APR claims (around 7%) accounted for 40% of the total value of APR, costing £219 million; the top 37 claims (around 2%) accounted for 22%, costing £119 million. These figures set the context for the April 2026 changes and the subsequent Budget 2025 adjustment on spouse transferability.
For completeness, the government has already extended APR from 6 April 2025 to certain land managed under agreements with UK public bodies and approved responsible bodies, reflecting environmental management schemes. That change sits alongside the April 2026 structure and may be relevant where holdings combine productive farmland with stewardship land.