What’s changing with Agricultural Property Relief (and why it matters)

From 6 April 2026, the full inheritance tax relief (100% Agricultural Property Relief) on qualifying agricultural property will only apply up to a new £2.5 million cap. David Hulse, Head of our Independent Financial Advisers, and Samantha Roberts, Trusts and Estates Administration specialist, explain the changes and what farmers and landowners can do to mitigate inheritance tax.

The change

The government is changing how Agricultural Property Relief (APR) works. At the moment, APR can reduce the inheritance tax (IHT) value on qualifying farmland and buildings to nil. From 6 April 2026, that full relief will be limited by a new allowance:

• 100% relief available only up to a new cap of a £2.5 million allowance (for qualifying APR and Business Property Relief (BPR) assets)

• Above £2.5 million, only 50% relief applies, meaning half of the value becomes taxable.

In practice, on the value above the allowance, you can end up paying 40% IHT on 50% of the value, which is effectively 20% of the assets total value.

Spouse and civil partner transfers become more important

There are provisions to transfer unused allowance to a surviving spouse or civil partner, potentially allowing up to £5 million combined qualifying allowance across two deaths (subject to conditions).

Transitional rules are in play (trusts and timing matters)

There are transitional arrangements (including treatment of certain transfers before 6 April 2026 and for trusts existing before 30 October 2024).

What does this mean for inheritance tax planning for farmers and landowners?

Many farming estates are land-heavy and cash-light. Under the old mindset, families assumed “APR means no IHT bill.”

However, under the new rules, estates could face meaningful IHT bills that may force:

• land sales

• borrowing against land

• rushed restructures

• family conflict about succession timing

There’s also another issue: the qualification risk.

APR only applies to qualifying agricultural property and often only to its agricultural value (not always “hope value” / development uplift, diversification assets, etc.). Any IHT planning has to start with what qualifies, what doesn’t, and at what value.

Real-life examples

Example 1: The 20% problem

A single farm owner dies in May 2026. The estate includes £6 million of qualifying APR assets, plus minimal other assets.

Before 6 April 2026, the logic would have been that the assets qualify for 100% APR, so there would be £0 IHT on the farm.

However, from 6 April 2026, the first £2.5 million would receive the full 100% APR, so would have £0 IHT. But the remaining £3.5 million would only receive 50% APR, so £1.75 million is now taxable. With IHT at 40%, this results in a £700,000 IHT bill.

The farm may now need cash planning (insurance, borrowing lines, staged succession, asset reshaping) to help mitigate this bill.

Example 2: Spousal transfers changing the outcome

A married couple with a farm has combined qualifying assets of £5 million. The first death occurs before 6 April 2026, but the second death after.

If structured well, through wills, ownership and elections and claims handled correctly, the unused allowance concept can allow up to £5 million qualifying assets to pass with 100% relief across the two deaths.

However, for many families, this becomes the difference between no forced sale and selling a parcel of land to pay HMRC.

Example 3: Trust timing

A family settled land into a trust years ago; another family did similar but after 30 October 2024.

Because transitional rules reference trusts existing before 30 October 2024, two families doing the same thing, but at different times, can land in different tax outcomes depending on timing and structure.

Because of this, the plan is only as good as its paperwork date and the legal form.

Mitigating the impact through professional advice

Seeking out professional advice can help you mitigate the impact of these changes will have on the inheritance tax bill your family could otherwise be left with.

Our solicitors can help you navigate the legalities that would allow you to best plan for these impacts.

Some examples of how our solicitors can help include:

• Wills built for APR/BPR reality: match ownership structure to the new allowance mechanics; avoid accidental outcomes that waste allowances.

• Partnership/company structuring: ensure land, trading operations, and diversified activities are legally organised to protect eligibility and succession aims (often farm partnership agreements are outdated).

• Trust planning (and reviewing existing trusts): confirm whether and how trust assets sit within transitional rules; ensure trustee powers and succession clauses work in practice.

• Succession documentation: deeds of gift/transfer, option agreements, pre-emption rights, and governance to stop the “one child wants out, one wants in” collapse scenario.

• Easements/leases/contracts: tidy up arrangements that can accidentally undermine “occupation/tenure” facts needed for relief arguments.

However, every farm and family set-up is different. A short review can confirm what qualifies, how the new allowance may apply, and what changes (if any) you should make now.

Speak to our agriculture team to arrange a confidential discussion.

Our independent financial advisers can help you through taking advantage of cashflow, funding and strategy. They may suggest:

• Liquidity planning for the IHT bill: quantify “how much cash will we need, when, and from where?” (including stress-testing land values and timing).

• Life cover / whole of life / estate liquidity insurance: structure policies (often written in trust) so the estate has cash without forcing a sale (subject to suitability and underwriting).

• Asset allocation around the farm: build non-farm liquid wealth so the farm doesn’t become the estate’s ATM at death.

• Gifting strategy and staged transfers: map lifetime transfers to family needs, control, and tax rules, alongside succession timetable (done carefully — gifts can create other tax and family risks).

• Coordination with accountants/valuers: ensure valuations distinguish agricultural value vs non-agricultural uplift (this is where a lot of tax pain appears in practice).

However, as financial circumstances are fluid and can change throughout your life, it’s important to seek out continuing financial advice from your financial adviser. This allows you to keep on top of changes and ensure that your money is protected for you and your family.

The combined approach

The strongest way to mitigate is usually a combination of guidance from both professionals, with a solicitor advising on the structure and documents, and a financial adviser guiding on the funding and long-term balance sheet, because APR changes turn a legal and tax concept into a cash problem.