Succession planning often fails for one simple reason – the tax position gets reviewed too late. From 6 April 2026, the rules on business property relief and agricultural relief will change, and that may alter how much inheritance tax (IHT) is due when business and farming assets pass to the next generation.
This matters now because IHT receipts remain high and more estates are being pulled into charge as asset values rise and key thresholds stay fixed. In HMRC’s latest annual accounts, IHT receipts for the year ended 31 March 2025 were £8.2bn (see HMRC’s annual report and accounts 2024 to 2025). For family businesses and landowners, the risk is that a plan built around full reliefs may no longer produce the expected outcome, and the estate may need liquidity to meet an IHT bill without selling assets under pressure.
The good news is that there is still time to review structures, valuations and wills, and to model the likely exposure. The earlier we do that work, the more options you usually have.
What is changing from 6 April 2026
The government is legislating for a new cap on the amount of property that can receive 100% relief under business property relief and agricultural relief, with a reduced rate applying above that cap. The policy paper on gov.uk sets out the design and transitional rules (see agricultural property relief and business property relief changes).
In practical terms, the headline points are as follows.
- New 100% allowance: A £2.5m allowance will apply for individuals, with a separate £2.5m trust allowance. Above the allowance, relief is expected to be at 50% rather than 100%.
- Transfer between spouses and civil partners: Any unused portion of the allowance can be transferred to a surviving spouse or civil partner, including where the first death occurred before 6 April 2026.
- Combined cap across reliefs: The allowance is intended to apply across qualifying business and agricultural property taken together, so claims for business property relief and agricultural relief interact more directly.
- Transitional rules and trusts: The operative date is 6 April 2026, with specific transitional rules for chargeable lifetime transfers and trust charges, particularly where gifts were made from 30 October 2024 onwards.
The detail matters. The same asset cannot normally receive both business property relief and agricultural relief, but in a typical estate you may have a mix of qualifying assets and non-qualifying assets, and the sequencing of claims, valuation and ownership can change the result.
How the cap changes agricultural relief in practice
Where assets qualified for 100% relief before, the main new exposure comes from value above the allowance only receiving 50% relief. Because the IHT rate is generally 40%, 50% relief can mean an effective 20% charge on the excess value.
Here are two simplified illustrations to show the mechanics. They are not a substitute for tailored calculations, but they help highlight potential pressure points.
Example 1 – farm and land passed on death: A farming estate includes qualifying agricultural property valued at £4m, and there are no other reliefs or exemptions available for simplicity. If the first £2.5m qualifies for 100% agricultural relief, the remaining £1.5m would only receive 50% relief. That leaves £0.75m chargeable to IHT. At 40%, the IHT on that slice is £300,000.
Example 2 – trading company shares and farmland: An estate includes £2m of qualifying trading company shares and £2m of qualifying agricultural property. Under a combined allowance approach, the 100% relief cap could be used up across both categories. That means part of the combined £4m may fall into the 50% relief band, creating an IHT cost even though both categories were previously capable of full relief.
In both cases, the outcome depends on the exact nature of the assets, who owns them, and whether the conditions for agricultural relief are met in full. Even a small change in how property is used, let or diversified can affect eligibility, and that can be more costly once the 100% relief is capped.
Valuations and eligibility: Where exposure often appears
When we review succession plans ahead of an IHT change, we usually see three recurring issues: valuations that are out of date, assets assumed to qualify without clear evidence, and liquidity planning that has not been tested.
Valuation discipline matters. IHT is based on market value at the relevant date and HMRC will expect valuations to be supported. For land and property, the evidence trail is especially important. If a succession plan is relying on agricultural relief, we want to be confident that the assets meet the conditions and that the valuation appropriately reflects any restrictions, tenancies or development potential.
Eligibility is not always straightforward. Agricultural relief generally focuses on agricultural property and its qualifying agricultural use. Problems can arise where the estate contains:
- farmhouses where occupation, character and use need to support the relief position
- land let under arrangements that change the relief rate or eligibility
- diversified activities, such as holiday lets or commercial storage, that may fall outside what qualifies for agricultural relief
- mixed portfolios where only part of the land is in qualifying agricultural use.
Liquidity is part of the tax plan. A capped relief model increases the chance that some IHT will be payable on death even where significant qualifying assets exist. That makes funding strategies more important – particularly where the goal is to keep the farm or business intact rather than selling assets quickly.
Planning options to consider before April 2026
No single approach suits every family, but there are practical steps most owners and landowners should consider well ahead of April 2026. We typically start by modelling the likely exposure under current ownership, then stress test alternative routes.
Revisit wills and succession documents: Ensure the will reflects current ownership, intended beneficiaries, and the use of spouse exemptions and transferable allowances. Align it with the agricultural relief strategy, rather than assuming relief will do the work on its own.
Review ownership and governance: Check whether assets are held personally, in partnership, or through a company – and whether that supports both the commercial plan and the relief position. For some families, clarifying who owns what (and why) improves tax outcomes and reduces disputes later.
Model lifetime planning: Consider whether lifetime gifts, family investment arrangements or phased transfers could reduce exposure. Timing and control matter, and so does the seven-year position for certain gifts.
Strengthen evidence for agricultural relief: Keep clear documentation on land use, tenancies, trading activity and decision-making. Where there is diversification, separate records can help demonstrate what qualifies and what does not.
Plan for funding an IHT bill: Explore how an estate would meet any tax due without a forced sale. That may include building cash reserves, reviewing borrowing capacity or considering insurance as part of a wider plan.
These steps work best when they are coordinated. Optimising agricultural relief while ignoring governance, cashflow or family objectives can create avoidable risk.
What we recommend doing next
If your succession plan relies heavily on business property relief or agricultural relief, April 2026 is a prompt to act, not to wait. The change does not mean every farm or family business will face a large new bill, but it does mean more estates will need a clear, evidence-based position and a practical funding plan.
Our recommended next steps are straightforward.
- Confirm what assets you expect to qualify for agricultural relief and at what value.
- Model the estate position under the new allowance and 50% relief band, including what happens on first and second death for couples.
- Identify where liquidity could be needed, and how it would be funded without undermining the business or land base.
- Put any changes into a written plan that your family and advisers can follow.
If you would like us to review your current position, we can help you build a clear, workable succession plan that reflects the April 2026 rules and protects the long-term future of the business. Start with our inheritance tax and estate planning support, or contact us to arrange a planning meeting. For more on how we support owner-managed organisations, visit our homepage and explore our wider advisory services.