The Government has published a response to its consultation 'Reforms to Inheritance Tax agricultural property relief and business property relief: application in relation to trusts'. A £1m cap on 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) will be introduced from 6 April 2026, with few changes from the original announcements.
Background
Agricultural Property Relief (APR) and Business Property Relief (BPR) reduce the value of qualifying assets for Inheritance Tax (IHT) purposes. These reliefs have historically provided up to 100% tax relief on eligible agricultural property and relevant business assets.
It was announced at the 2024 Autumn Statement that from 6 April 2026:
- The 100% rate of APR and BPR will remain at 100% up to a combined allowance of £1m.
- Where the value of business and agricultural property assets exceeds the £1m allowance, the rate of relief will be reduced to 50%.
In February 2025, HMRC published a Consultation on the technical application of the proposed changes in the context of trusts. This sets out greater detail on how the rules are expected to operate.
Responses
The consultation received 122 responses:
- The majority believed that the rules on the application of the £1m allowance were sufficiently clear.
- Views on the proposal to standardise the calculation of IHT Exit charges were mixed.
- Most respondents were supportive of the introduction of a transitional period.
- Respondents generally understood the rationale for introducing the anti-fragmentation provision.
- Most respondents disagreed with an allowance that was fixed at the outset and preferred individuals to be able to elect, transfer or opt out of using the £1m allowance.
- Most respondents were against introducing rules similar to the existing 'related' property provisions.
- Most respondents welcomed the application of the £1m allowance to age 18 to 25 trusts.
- Views on applying the £1m allowance to Qualifying Interest In Possession (QIIP) trusts were mixed.
- Most respondents raised concerns about the complexity of the reforms, the corresponding administrative burden, and HMRC's capacity to enforce the changes.
Next steps
The government will proceed with implementing the reform of APR and BPR from 6 April 2026 as originally set out in the consultation document; however:
- The £1m allowance will be indexed in line with CPI. It will remain fixed up to and including 2029-30.
- The government will not proceed with the proposed extension of the related property rules for qualifying property settled into multiple trusts.
- The longstanding exemption from IHT for Scottish Agricultural Leases will be updated to ensure that newer equivalent leases are also exempt.
Draft legislation to implement the measure has been published for further technical consultation, which closes on 15 September 2025.
Further guidance and worked examples will be provided to support implementation and ensure clarity.
Useful guides on this topic
IHT Agricultural Property Relief
What is Agricultural Property Relief (APR)? When does it apply? What are the conditions and restrictions of the relief?
IHT Business Property Relief
A guide explaining what Business Property Relief is, when it can apply and pitfalls and planning points.
Trusts & Estates: Exit charge reporting requirements
What is an exit charge, or proportionate charge, and when does it apply?
External links
Consultation outcome: Reforms to Inheritance Tax agricultural property relief and business property relief: application in relation to trusts