The government has confirmed that the new combined allowance for 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) will rise from the originally proposed £1 million to £2.5 million per individual. The revised threshold, which will take effect from 6 April 2026, forms part of the Inheritance Tax (IHT) reforms first announced in the Autumn Budget 2024.
Under the new regime, individuals will be entitled to 100% relief on qualifying agricultural and business assets up to a combined value of £2.5 million. Any value exceeding this threshold will attract relief at a reduced rate of 50%, effectively subjecting the excess to a 20% IHT charge. For Trusts, the £2.5 million threshold will apply on a rolling 10-year basis, while for individuals, the allowance will refresh every seven years.
The government’s original policy intention was to introduce a £1 million cap, but the December 2025 update marks a significant concession, amid criticism from farmers, business owners, and tax professionals. The increase was formally announced on 23 December 2025 and follows an earlier decision to allow unused allowances to be transferred between spouses and civil partners.
Importantly, the government has confirmed that the transferability of the allowance will also apply retrospectively to individuals who were widowed before the policy was introduced, aligning with existing provisions for the nil-rate band and residence nil-rate band.
The Treasury stated that the enhanced allowance is intended to “significantly reduce the number of farms and business owners facing higher Inheritance Tax bills under the reforms, ensuring that only the largest estates are affected”.
Further details are expected later this month, when the provisions are introduced as part of the Finance Bill 2025–26. We recommend you seek professional advice from your tax adviser if you’re likely to be exposed to APR or BPR, particularly in light of the new thresholds, qualifying conditions, and the potential interaction with anti-forestalling rules on lifetime gifting.
