Major IHT revision: government raises APR/BPR cap after pushback

The government has today announced a significant revision to the forthcoming inheritance tax (IHT) reforms affecting Agricultural Property Relief (APR) and Business Property Relief (BPR), increasing the threshold for 100% relief from £1 million to £2.5 million per individual from April 2026. 

This adjustment marks a substantial shift in the policy landscape and provides welcome clarity for farmers and business owners who have been concerned about the impact of the original proposals. With the earlier additional confirmation in the Budget 2025 that the allowance is also transferable between spouses or civil partners, couples will now be able to pass on up to £5 million of qualifying agricultural or business assets free of IHT, in addition to their existing nil rate bands.

Today’s announcement follows sustained feedback from the farming and business communities since the Budget 2024 reforms were unveiled. The government has positioned the increase as a targeted response to those concerns, aiming to protect the viability of family farms and trading businesses while maintaining the principle that the most valuable estates should not benefit from unlimited relief.

The revised increased threshold is expected to halve the number of estates claiming APR (including those also claiming BPR) that would otherwise have faced higher IHT liabilities under the new regime. Notably, around 85% of estates claiming APR in 2026/27 are now forecast to pay no additional IHT as a result of the reforms.

The government has confirmed that 50% relief will continue to apply to qualifying assets above the new £2.5 million threshold, preserving the structure of the original reform while materially reducing its reach. The change will be legislated through an amendment to the Finance Bill 2025 and will apply from 6 April 2026. Importantly, the transferable nature of the allowance will also extend to surviving spouses and civil partners who were widowed before the policy was introduced, ensuring consistency and fairness in its application.

This announcement represents a meaningful recalibration of the IHT reform package. While the government remains committed to reducing the generosity of APR and BPR for the largest agricultural and business estates, it has clearly sought to balance this with the economic and social importance of family-run enterprises.

We will continue to monitor the legislative detail as the Finance Bill progresses and will provide further analysis on the practical implications for estate planning and succession strategies once the draft provisions are published.