APR and BPR reform: useful improvements, but no general U turn

In their current form, agricultural property relief (APR) and business property relief (BPR) provide relief from UK inheritance tax (reducing the tax due either by 50% or 100%) in respect of eligible business or agricultural property. 

However, as reported in our previous articles (The inheritance tax consultation on agricultural and business property relief and Legislation Day – points to note for private clients), the UK Government announced significant reforms to these reliefs at the 2024 Autumn Budget, scheduled to take effect from 6 April 2026.

A key element of the changes initially announced in 2024 was that, from 6 April 2026, individuals (and trusts) would qualify for 100% APR or BPR up to a combined limit (for both reliefs) of £1m (with any value of eligible business or agricultural property above this threshold qualifying for relief at 50%). The Government also stated that the £1m allowance would not be transferable between spouses or civil partners (notwithstanding that this would be at odds with how other inheritance tax allowances, such as the nil rate band, operate).

Despite much publicised opposition to the reforms, draft legislation published in July 2025 did not alter either the level of the allowance or the lack of spousal/civil partner transferability.

However, having "listened to concerns", the Government has recently announced a softening of its approach with the following changes: 

• At the Autumn Budget on 26 November 2025, it was announced that the combined APR / BPR allowance would now be transferable between spouses and civil partners; and
• A subsequent Government press release on 23 December 2025 confirmed that the allowance would be increased from £1m to £2.5m.

These amendments are now included in the Finance Bill which is currently making its way through Parliament.

In practice, these welcome announcements mean that spouses and civil partners will be able to leave a combined limit of £5m of qualifying business or agricultural property to their heirs, free from inheritance tax. However, whilst this will substantially mitigate the impact of the reforms for many taxpayers, high-net-worth individuals and trusts holding more valuable agricultural or business interests will still face materially higher inheritance tax exposures than under the current regime.

There had been hopes that the reforms would be abandoned altogether but given these recent changes to the proposals it seems highly unlikely that there will be any further softening of the reforms.

Affected taxpayers should therefore use the remaining couple of months before implementation of these changes to review their estate planning arrangements and ownership structures with their advisors, to ensure that they consider the use of their allowances (including transferability for couples) and to assess whether any other action (such as establishing new trust structures or dismantling existing arrangements, depending on the circumstances) is desirable to help manage the impact of the reforms.

For further advice, please get in touch with your usual contact at Macfarlanes.