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With speculation mounting regarding the forthcoming 2025 Autumn Budget, it's worth revisiting the huge impact of last year's Budget on the rural sector.
The proposed changes to agricultural property relief (APR) and business property relief (BPR) are expected to take effect from 6 April 2026 and will have significant implications for land and business owners in the UK.
Before the changes announced in the 2024 Autumn Budget, rural landowners could plan the succession to their property and business assets in the knowledge that APR could provide 100% relief on the agricultural value of land and property, with no upper limit or cap. BPR could also provide up to 100% relief, or in some cases 50% relief, on the value of qualifying business assets, with no upper limit. As a result, inheritance tax (IHT) planning has, for many rural landowners, been a relatively straightforward process.
The IHT changes announced in the 2024 Autumn Budget proposed combining and capping the full reliefs available for APR and BPR to a maximum of £1 million, with a 50% relief applying to any assets above that level. As a result, many agricultural business owners are urgently re-evaluating their succession plans.
Consultation
Following consultation across the rural industry, some amendments and clarifications to the IHT changes were published by the Government as part of the draft legislation which will bring in the new rules:
- Despite substantial industry-lobbying, the £1 million
combined cap on APR and BPR is unchanged. The only (minor)
concession is that the cap will be indexed-linked in line with the
Consumer Price Index (CPI) from 2030.
- In addition to lobbying for an increase on the £1m cap,
the rural sector sought a change to allow transfer of any unused
portion of the £1m relief between spouses. It was suggested
that this could operate in a similar way to the existing rules on
transfer of unused IHT tax allowances between spouses. The
Government rejected this proposal.
As a result, many rural farm businesses are now looking to spread the ownership of APR/BPR qualifying assets to ensure that everyone in the business will hold at least £1m in value. However, moving assets has many consequences, both intended and unintended, so this will require careful consideration in all cases.
- Many consultation respondents proposed an ‘election
process' which would allow taxpayers to choose which assets
would receive APR/BPR relief. It was suggested that this would give
individuals more control over succession planning, by guaranteeing
that specific assets would benefit from IHT relief. This proposal
was rejected by the Government on the basis it would add a layer of
complexity which would result in an increased administrative cost
for HMRC.
- Although the consultation did not seek views on the impact of the changes on Scottish agricultural tenancies, concerns have been raised as to how the Government intends to deal with this issue, and there remains uncertainty on this.
Next Steps
The Government has run a further consultation, which ends on 15 September 2025, on the technical drafting of the legislation.
One thing for certain is that the changes are still on track to be implemented from 6 April 2026 and agricultural business owners should ensure that they have taken steps to sufficiently prepare for these changes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
