Key Changes from 6 April 2026

The reforms will significantly reduce the scope of Agricultural Property Relief (APR) and Business Property Relief (BPR) for IHT purposes. The main changes include:

• £1 Million Cap on Relief: Each individual will have a £1 million cap on the total amount of APR and BPR relief available at 100%.

• This cap may be increased in line with the Consumer Price Index (CPI) after the 2029/30 tax year, subject to government approval.

• Any value exceeding this £1 million cap will be subject to IHT at a reduced rate of 20% instead of the standard 40%.

• Interest-Free Instalments for IHT on Surplus: IHT due on the amount exceeding the cap can be paid over 10 years in interest-free annual instalments, providing some cash flow relief.

• Cap Non-Transferable Between Spouses: Unlike the individual nil rate band, the £1 million relief cap cannot be transferred between spouses or civil partners.

Practical Implications and Challenges

While the introduction of interest-free instalments is a concession to ease cash flow pressures, there are notable concerns:

• Increased Tax Burden on Businesses: Businesses may face higher tax rates when extracting funds to cover the IHT liability on the surplus above the cap.

• Personal Representative Liability: Personal Representatives (PRs) remain personally liable for ensuring the IHT is paid. If beneficiaries fail to meet instalment payments, PRs may bear the risk.

Planning Considerations

Given the reforms, individuals should carefully review their estate planning strategies to optimise reliefs, which might include:

• Gifting up to £1 million of business or agricultural assets upon the first death to beneficiaries or trusts instead of passing the entire estate to the surviving spouse or civil partner.

• Considering alternative arrangements to mitigate exposure to the reduced relief cap and ensure liquidity for potential IHT liabilities.

Summary

The APR and BPR reforms effective from April 2026 introduce a £1 million relief cap and change the payment structure for IHT on agricultural and business properties. Early planning is essential to navigate the increased complexity and potential financial impact on estates.

If you would like advice tailored to your circumstances, please contact us to arrange a meeting with one of our estate planning team.

In addition to the IHT reforms discussed above, the government have issued policy papers and draft legislation in regards to pension scheme reforms which is discussed further here.

Get in touch today

If you would like further information or have any queries about your situation and wish to have a no obligations chat with a member of our team, give us a call today on 01482 590159.

About the author: Sam Turner