The £1m Agricultural Property Relief (APR) and Business Property Relief (BPR) threshold will increase to £2.5m from April 2026, allowing spouses or civil partners to pass on up to £5m in qualifying agricultural or business assets between them before paying inheritance tax, on top of most existing allowances. This was originally set at £1m per person when introduced in the Autumn Budget in October 2024.
How can Agricultural Property Relief and Business Property Relief reduce inheritance tax?
APR reduces the tax payable on agricultural property, and BPR reduces the tax payable on business property, when reporting an estate for inheritance tax or gifting purposes. These reliefs may be given at either 100% or 50%, depending on the asset type. As a result, APR and BPR can significantly reduce, or even eliminate inheritance tax when:
- a person dies or gifts assets to another person or to a trust during their lifetime, and
- when a trust is subject to 10-year anniversary charges and charges on capital distributions.
What is BPR?
BPR is a relief applied to business property for inheritance tax purposes.
100% relief applies to:
- Sole trade businesses or interests in partnerships or LLPs,
- Securities giving control of unquoted companies, and
- Shares in unquoted companies.
50% relief applies to:
- Shares or securities giving control of quoted companies, and
- Land, buildings, machinery, and plant owned by the taxpayer but used by a company controlled by the taxpayer or a partnership of which they are a partner.
- Shares listed on an alternative stock exchange.
For an asset to count as relevant business property, the business must be carried on with the aim of making a profit and must not consist wholly or mainly (i.e., more than 50%) of:
- Dealing in securities, stocks, or shares
- Dealing in land or buildings
- Making or holding investments
The business must also be an ongoing concern which is not in the process of liquidation or winding up or subject to a binding contract for sale, and the asset must usually have been owned by the donor for at least two years.
So, for example, a business investing in properties and letting them out would not qualify for BPR as its business would consist of making or holding investments. However, if a farming business has rented out some properties, BPR may still be available if the business does not primarily consist of investment activities.
It’s a complex area, and case law has been used to determine the factors to consider when assessing the ‘wholly or mainly’ test.
What is APR?
APR is available for gifts of land occupied for agricultural purposes, together with appropriate buildings and farmhouses. The property in question must have been either occupied by the owner for agricultural purposes for two years prior to the gift or the owner’s death.
Again, the definition of what constitutes’ land occupied for the purposes of agriculture’ is complex, and advice should be sought prior to a gift being made or at the start of the administration of an Estate.
How we can help
As with all Estates that include a business with assets of value, careful Estate and succession planning should be undertaken in advance to ensure you are making the most of the available allowances and legally mitigating inheritance tax.
Contact our Wills, Trusts & Estate Administration team in Lower Earley, Reading on T: 0118 975 6622 or Henley-on-Thames on T: 01491 570 900.