Autumn Budget 2025: Agricultural Property Relief & Business Property Relief Changes
Prior to 9 October 2007, inheritance tax planning for married couples and civil partners was far more complex as nil-rate bands, the tax-free allowance for inheritance tax, could not be transferred between spouses and civil partners. This often meant families had to take careful steps, such as transferring assets to children or entering into discretionary trusts to ensure their nil-rate bands were not wasted.
The introduction of transferable nil-rate bands in 2007 simplified this process, allowing any unused allowance to pass to the surviving spouse or civil partner. Upon the second death, their estate could then benefit from the remainder of both allowances, reducing the overall tax burden.
It was announced in the 2025 Budget that from 6 April 2026, similar flexibility will apply to Agricultural Property Relief (APR) and Business Property Relief (BPR). These changes bring APR and BPR in line with the nil-rate band rules, meaning unused allowances can be transferred to a surviving spouse or civil partner. This is a significant step towards making estate planning easier for families who own farms or businesses.
What are APR and BPR?
APR is a type of inheritance tax relief which reduces the amount of tax that farmers and landowners pay when their farmland and farmhouses are passed to the next generation.
BPR works similarly but applies to business assets, including unlisted shares, business premises and machinery that form part of an estate.
What has been announced?
1. A new £1 million allowance
In addition to the existing nil-rate bands, a new £1 million allowance will apply to assets in an estate qualifying for 100% APR or BPR. Any qualifying assets above £1 million will attract relief at a reduced rate of 50%. This £1 million allowance has been frozen until 5 April 2031.
Combined with existing nil-rate bands, the new £1 million allowance will mean two individuals could pass on up to £3 million tax-free between them.
2. Transferable allowance
Much like the nil-rate bands, any unused portion of the £1 million allowance can be transferred to a surviving spouse or civil partner from 6 April 2026. If the first death occurs before 6 April 2026, it will be assumed that the entire £1 million allowance will be available for transfer to the surviving spouse or civil partner.
3. Trusts
A separate £1 million allowance will apply to agricultural and business property held in trusts, creating a further opportunity for planning for families who hold qualifying assets.
What might this mean for you?
This change is likely to be welcome news for many farmers and business owners who are considering how best to pass on their assets to the next generation. The key advantages are as follows:
Less pressure to split ownership early – couples can now leave everything to their spouse or civil partner in their Will without losing any unused APR or BPR. Passing farming or business assets to children to utilise these reliefs often involved administrative and financial complexities, which these new rules help to reduce or even eliminate.
More flexibility - Couples can focus on long-term estate planning without worrying that unused relief is wasted. Balancing qualifying assets between spouses or civil partners to utilise both APR/BPR will no longer be required, as any unused allowance will pass to the surviving spouse or civil partner.
How can we help?
Our team can guide you through these changes and help you protect your family’s future. Whether you own farmland, a family business or shares, we’ll ensure your estate plan reflects the new rules and maximises available reliefs. If you would like advice or assistance on any of the new changes, the Wills, Trusts and Probate Team at Leathes Prior are here to help.