The government has announced that the allowance for Business Property Relief (BPR) and Agricultural Property Relief (APR) will be £2.5 million when it is introduced on 6 April 2026, rather than £1 million as originally proposed. The government has made this decision after listening to feedback from businesses and the farming community.

The full 100 per cent relief from Inheritance Tax (IHT) will be restricted to the first £2.5 million of combined business and agricultural property. Any unused allowance can be transferred to a surviving spouse or civil partner, meaning that a combined allowance of £5 million is available to couples, in addition to other allowances such as the nil-rate band. Relief will be available at 50 per cent on qualifying assets above the allowance, meaning that those assets will be subject to an effective IHT rate of 20 per cent. The IHT can be paid in equal instalments over 10 years interest free.

The increase in the allowance will significantly reduce the number of farms and business owners facing higher IHT bills, ensuring that only the largest estates are affected. The government estimates that the number of estates claiming APR, including those also claiming BPR, affected by the reforms in 2026/27 will fall from 375 to 185. The number of estates affected claiming only BPR, excluding those holding only shares listed on AIM, will fall by a third.

It is forecast that around 85 per cent of all estates claiming APR in 2026/27, including those that also claim BPR, will not pay any more IHT as a result of the reforms.