The agricultural sector is the backbone of our rural economy and farming families have long relied on agricultural property relief (APR) and business property relief (BPR) to ensure the smooth, tax-efficient succession of their businesses.

However, recent announcements in the Autumn Budget 2024 have introduced significant changes to these vital inheritance tax (IHT) reliefs, posing new challenges and uncertainties for farming businesses, including partnerships across the UK.

From 06 April 2026, the landscape for APR and BPR will look distinctly different, so proactive planning is now more important than ever.

What are the key changes to APR and BPR?

Historically, APR and BPR could offer up to 100% relief from IHT on qualifying agricultural and business assets, without a cap on the value of assets relieved. This has been instrumental in allowing farms to pass down through generations without the burden of tax liabilities that could otherwise jeopardise the business by forcing the sale of land or assets.

The significant reform, set to take effect from 06 April 2026, introduces a £1 million cap on the combined value of assets eligible for 100% relief under APR and BPR per individual.

This means:

• 100% relief will only apply to the first £1 million of combined agricultural and business property.
• Any value exceeding this £1 million threshold will only qualify for 50% relief, effectively resulting in a 20% IHT charge on the excess value (assuming the standard 40% IHT rate).
• Crucially, this £1 million allowance is not transferable between spouses or civil partners. This is a significant departure from other IHT reliefs like the nil-rate band, where unused portions can often be transferred.
• Anti-forestalling rules are already in effect for lifetime gifts made on or after 30 October 2024. If the donor dies on or after 06 April 2026, but within seven years of the gift, the new rules will apply.

The specific impact on farming partnerships

These changes will have a significant impact on farming partnerships, particularly those with substantial asset values. Many farming businesses have structured their succession plans around the previous unlimited relief, assuming a largely tax-free transfer of assets. This approach now requires a serious re-evaluation.

Consider a typical farming partnership where assets (land, buildings, machinery, livestock and quotas) often run into several millions of pounds. Under the new rules there may be:

• Increased IHT liabilities: for larger farming estates, the £1 million cap will inevitably lead to significantly higher IHT bills upon the death of a partner. This could place considerable financial strain on the surviving partners or beneficiaries, potentially necessitating the sale of valuable assets to meet the tax demand.
• Succession planning complications: the ability to pass the farm to the next generation without triggering a large tax bill was a cornerstone of many family farm succession plans. The new cap complicates this, requiring more careful and strategic planning to mitigate the impact.
• Asset ownership review: with the allowance being individual and non-transferable, farming couples will need to carefully review the ownership of their agricultural and business assets to maximise their individual £1 million allowances. This might involve transferring assets between spouses during their lifetime, carefully considering any Stamp Duty Land Tax (SDLT) or Capital Gains Tax (CGT) implications.
• Partnership agreement revisions: existing partnership agreements may need to be updated to reflect the new tax landscape. Considerations will include how the farm assets are treated on the death or retirement of a partner, profit sharing, and the ability to transfer capital within the partnership.
• Diversification considerations: while the traditional agricultural use of land remains essential for APR, the interplay with BPR for diversified activities will become even more complex. Where a farming business has diversified into non-agricultural ventures (for example, holiday lets and renewable energy projects) careful analysis will be needed to ensure continued BPR qualification and to optimise the use of the combined £1 million allowance.
• Lifetime gifting: while lifetime gifting remains a valuable tool, the anti-forestalling rules and the seven-year survival period mean that any gifts made now must be carefully considered in light of the 2026 changes.