In last year’s Autumn Budget, Chancellor Rachel Reeves announced significant Inheritance Tax (IHT) reform, which would take effect from April 2026 and is expected to impact many individuals’ estate plans.

The changes taking effect early next year impact the Agricultural Property Relief (APR) and the Business Property Relief (BPR), in which the full 100 per cent relief from IHT will be restricted to the first £1 million of combined assets.

Time is running out for farmers and business owners to check their estate planning measures and ensure they have reduced the risk of facing a much higher IHT bill.

Preparation is key so having as much information on the reliefs and IHT can help you put measures in place to protect your estate and manage any tax concerns.

What did the Chancellor announce about APR and BPR?

The Chancellor confirmed the full 100 per cent inheritance relief will be restricted to the first £1 million of all combined agricultural and business property.

This means farmers and business owners whose combined assets meet the £1 million threshold face the prospect of an IHT bill, taxed at the standard 40 per cent rate.

The reform of APR and BPR is designed to make the rules in place fair and support small family farms and businesses.

The new changes are also in part linked to the Government’s need to balance its books, with Rachel Reeves needing to fix the current financial black hole and stimulate economic growth, while sticking to her own tight fiscal rules.

Unsurprisingly, the changes have not pleased farmers because not only do they face an increased IHT bill, but their succession and estate plans have been thrown into turmoil and their farm’s future put at risk.

Inheritance Tax collection continues to reach record figures, and these changes are expected to play a role in further revenue being generated from IHT.

How will the changes impact farmers and business owners?

The reform to the APR and BPR reliefs is going to impact the long-term succession plans of farmers and businesses.

Families would inherit the IHT debt once you pass away if the total assets combined are within the £1 million threshold. This means your family will need to find a way to pay the debts, which could mean dipping into farm profits or selling some of the land.

It will have a detrimental effect on your succession plans, meaning you may consider other options when organising your estate to avoid any unwanted IHT bills.

It won’t be as simple anymore to pass your farm or business down to the next generation because now they face the prospect of a tax bill. It leaves you in a position where you’ll need to consider the tax implications and implement measures to reduce the IHT risks.

Options to consider include gifting beneficiaries their assets early to reduce the overall estate value or putting your farm and other assets into a trust. This will help mitigate the IHT risks and ensure your beneficiaries receive their inheritance.

Preparation is key

With the changes taking effect in six months’ time, it is important that you are prepared and have organised your estate accordingly.

You don’t want to place extra financial pressure on your family, and planning ahead of time gives you the best opportunity to reduce the potential financial impact, and this is where our team can help.

We offer tailored tax advice to ensure you understand your legal obligations, how IHT works and how the changes will impact your estate. We give you the tools to make the right decisions that protect your interests as well as those of your beneficiaries.

Plan ahead of time by contacting our expert team of tax advisors.