Business & Agricultural Relief UK 2026/27 — IHT Changes

From 6 April 2026, UK Inheritance Tax planning for qualifying business and agricultural property uses a combined £2.5 million allowance for 100% relief. Where the combined value of qualifying property exceeds the available allowance, the excess generally receives 50% relief, rather than 100% relief. A surviving spouse or civil partner may be able to transfer unused allowance, potentially taking the available allowance to up to £5 million.

This is not a £2.5 million exemption from all Inheritance Tax. It is an allowance for the part of qualifying business and agricultural property that can receive 100% Agricultural Property Relief (APR) or Business Property Relief (BPR). The asset must still qualify, the ownership and use conditions still matter, and the allowance may be reduced by earlier transfers. Read the UK Inheritance Tax guide for the wider nil-rate bands and estate calculation.

What changed on 6 April 2026?

Before the reform, qualifying property could in some cases receive 100% relief without the new combined individual allowance. For deaths and relevant transfers on or after 6 April 2026, the relief is limited by a single allowance covering qualifying property that would otherwise receive 100% APR or BPR.

The allowance can cover:

• qualifying agricultural property;
• qualifying business property;
• a combination of agricultural and business property;
• certain qualifying lifetime gifts that fall into the estate if the donor dies within seven years; and
• qualifying property held in some trusts, under separate trust rules.

The allowance is not a general nil-rate band and it does not remove the need to test the asset against the APR or BPR conditions. Property that only qualifies for 50% relief is not transformed into 100% relief by the allowance.

How the combined allowance works

The allowance is shared across the qualifying property, rather than being £2.5 million for farms plus another £2.5 million for businesses. For a simple illustration:

This does not calculate the estate's Inheritance Tax. It simply shows why a family cannot add separate £2.5 million allowances for each asset class. HMRC's apportionment guidance explains how the allowance is allocated across qualifying property and why a value above the allowance is not automatically excluded from relief.

Can a spouse's unused allowance be transferred?

An unused allowance from a predeceased spouse or civil partner may be transferred to the later estate. HMRC's current guidance says the available allowance could be as high as £5 million where the full unused amount is transferable.

The transfer is not automatic in every practical case. The executor or personal representatives must establish the earlier death, the relief used by the first estate, the qualifying property and the claim deadline. The deadline can depend on when the survivor dies and when the personal representatives begin their role. Keep the first estate's records rather than assuming that a surviving spouse's full allowance is available.

The transferred amount also applies to the combined APR/BPR allowance. It is not a separate £2.5 million for agricultural assets and another £2.5 million for business assets.

Which business assets can qualify for BPR?

HMRC's Business Relief guidance says 100% relief can apply to a business or interest in a business and to shares in an unlisted company, subject to the detailed conditions. A business mainly dealing in securities, stocks or shares, land or buildings, or making or holding investments may not qualify in the same way.

Important checks include:

• how the business operates rather than just its legal label;
• whether the owner held the business or asset for the required period;
• whether the asset was used mainly for the business;
• whether surplus investment assets are included; and
• whether the transfer is a gift, a death transfer or a trust event.

Shares designated as “not listed” on a recognised stock exchange have a separate 50% BPR treatment under the reform. Do not describe an AIM or other quoted shareholding as automatically receiving the same relief as an unlisted trading-company shareholding. Confirm the statutory market designation and the business activity.

Which agricultural assets can qualify for APR?

Agricultural Relief can apply to qualifying agricultural property, such as farmland, pasture and certain agricultural buildings or assets, but the rate and eligibility depend on the property and the transfer circumstances. HMRC distinguishes the higher 100% rate from cases where only 50% relief applies.

For deaths on or after 6 April 2026, the combined amount receiving 100% APR and BPR is subject to the £2.5 million allowance. Property above the allowance may receive 50% relief if it otherwise qualifies. A farm's market value alone is not enough: the occupation, use, ownership period, tenancy and transfer history all need to be checked.

Where agricultural and business relief could both apply to the same property, the interaction matters. HMRC guidance says Agricultural Relief is applied in preference to Business Relief in the relevant circumstances. Do not count the same asset twice when estimating the allowance.

Lifetime gifts and the seven-year look-back

The allowance can include qualifying property given away on or after 30 October 2024 if the donor dies within seven years. A gift therefore cannot be assessed only by looking at what remains in the estate on the date of death.

Keep evidence for each transfer, including:

• the date of the gift;
• the ownership and qualifying use before and after the transfer;
• the value and asset classification;
• any trust documentation; and
• whether an earlier gift has used part of the available allowance.

This is especially important where a business or farm was reorganised, incorporated, transferred into trust or divided among family members before death.

How trusts fit into the rules

The combined allowance also applies to qualifying property in trusts, but the treatment depends on the type of trust and the charge being assessed. A trust can face ten-year anniversary charges and exit charges as well as consequences when property is transferred into the trust.

Do not copy the individual death calculation into a trust return. Review the trust's relevant dates, the settlor's transfers, the available trust relief allowance and the statutory apportionment rules. The UK Inheritance Tax Trust Reporting guide covers the related compliance decision.

What executors should prepare

Valuation and evidence issues

The relief calculation starts with a defensible value, not with the family’s preferred description of an asset. Obtain valuations for land, buildings, plant, private-company shares and any business interest that may be transferred. A company’s book value is not automatically its market value, and an agricultural property valuation may need to distinguish agricultural value from development or investment value. Keep the valuation date aligned with the death, gift or other charge being reviewed.

Then build an asset-by-asset schedule. For each item, record the legal owner, beneficial owner, date acquired, date transferred, occupation or business use, any lease or tenancy, and whether the asset was used by the relevant business. Note mortgages, joint ownership, options, trusts and related-party arrangements separately. These facts can affect both the value brought into the estate and whether APR or BPR is available. The schedule should show which property is seeking 100% relief and which property is being considered for 50% relief; do not combine them into one unexplained percentage.

For a private company, review the underlying business as well as the shares. A trading company may hold cash, securities, investment property or other assets that do not support the same relief treatment. Analyse the company’s activity over the relevant ownership period, identify assets used in the trade, and preserve accounts and board records that explain why an asset is held. A share certificate or Companies House description is not, on its own, proof that every part of the holding qualifies.

For a farm, preserve tenancy agreements, occupation records, farming accounts, planning information and evidence of who used the land. Check whether the owner farmed the property, whether it was occupied by another person or business, and how the property was used immediately before the transfer. A farm can contain a mixture of land, farmhouse, buildings, private residence and non-agricultural assets, so the schedule may need separate lines rather than one farm-wide percentage.

How to test an illustration

Suppose an estate contains £2 million of property that qualifies for 100% relief and £1.5 million of additional property that also appears to qualify for 100% relief. The combined £3.5 million is not covered by two allowances. The available 100% allowance is applied under the statutory ordering and apportionment rules; the value above that allowance may receive 50% relief if the asset satisfies the separate conditions. The result is then combined with the rest of the estate, transferable nil-rate band, residence nil-rate band where relevant, lifetime transfers and liabilities. The simple illustration is therefore not the same as the estate’s final IHT bill.

If the estate includes qualifying lifetime gifts, add them to the chronology before allocating the remaining allowance. Check the gift date, whether the donor survived seven years, whether the property remained qualifying, and whether the gift was into a trust or to an individual. A later change in use or ownership can alter the analysis. Executors should not assume that a gift described as a “family business transfer” automatically qualifies.

Finally, separate legal eligibility from filing. The executor may need valuations, accounts, ownership documents and relief schedules before completing the relevant IHT return. If HMRC asks questions, the evidence should reproduce the facts at the relevant date rather than relying on a current website description or a retrospective family statement. For valuable mixed estates, obtain specialist advice before distributing assets or making a late relief claim.

Frequently Asked Questions

Official sources

• HMRC: Changes to Agricultural Property Relief and Business Property Relief
• HMRC: Work out how to apportion Agricultural and Business Relief
• HMRC: Agricultural Relief for Inheritance Tax
• HMRC: Business Relief — what qualifies
• UK Parliament: Finance Act 2026

For the wider estate calculation, read the UK Inheritance Tax guide and Inheritance Gifts guide. Use HMRC's official Agricultural and Business Relief apportionment tool when the estate contains both types of qualifying property.