If you read about the so-called farm tax at almost any point in 2025, you read that 100% relief would be capped at £1 million per estate and that the allowance could not be passed to a spouse.
Both of those statements were true when they were written. Neither is true now, and they were undone separately: transferability between spouses was announced at Budget 2025 on 26 November, and the threshold was raised to £2.5 million on 23 December 2025. Both changes came after the policy was announced and before it took effect on 6 April 2026.
The result is a large body of commentary, much of it still online and still ranking, describing a version of the rules that never came into force.
What actually changed on 6 April 2026
Before that date, qualifying agricultural and business property attracted 100% relief with no ceiling. An estate of any size could pass a working farm or trading business on with no inheritance tax at all.
From 6 April 2026 there is a cap:
| Position | |
|---|---|
| Combined APR and BPR qualifying property up to £2.5 million | 100% relief |
| Value above £2.5 million | 50% relief |
| Effective rate on the excess | 20% (half of 40%) |
The allowance applies to the combined value of agricultural and business property. It is one allowance covering both, not one each.
The two reversals worth knowing about
The threshold. GOV.UK states the change plainly: "Increase the threshold at which 100% Agricultural Property Relief and Business Property Relief applies from £1 million to £2.5 million per estate." That was announced on 23 December 2025.
Transferability. The original policy document said any unused allowance "will not be transferable between spouses and civil partners." At Budget 2025, on 26 November, the government announced the opposite: any unused amount of the combined allowance can be transferred to a surviving spouse or civil partner, including where the first death was before 6 April 2026.
The rule for deaths before April 2026
This one is unusually generous and easy to miss.
Where the first spouse died before 6 April 2026, GOV.UK states that "the entirety of the £2.5 million allowance will be available for transfer."
The logic is simple once you see it: the allowance did not exist before that date, so it is impossible for the first death to have used any of it. The survivor therefore carries a full, untouched £2.5 million on top of their own.
A widow or widower whose spouse died years ago has a £5 million combined allowance available, without anyone having planned for it.
That is worth setting against the alternative most families reach for first. Giving a business away during your lifetime puts it under the seven-year rule, with all the survival risk that carries — and if you carry on drawing an income from what you gave away, the gift with reservation rules pull it straight back into the estate regardless.
What a couple can actually pass on
GOV.UK puts the combined figure at up to £5.65 million tax-free between two people:
| Component | Amount |
|---|---|
| Two APR/BPR allowances | £5,000,000 |
| Two nil-rate bands | £650,000 |
| Total | £5,650,000 |
Note what is absent. The residence nil-rate band does not appear, and on an estate of this size it would not survive anyway — it tapers away entirely above £2.35 million, as that article sets out.
AIM shares are treated worse, and separately
This is the part most affected investors have not registered.
Shares traded on exchanges designated as "not listed" — which is how AIM is classified — move from 100% relief to 50% relief in all circumstances. The same applies to qualifying shares on foreign exchanges that are not recognised stock exchanges.
"In all circumstances" is doing real work in that sentence. These shares do not benefit from the £2.5 million allowance. There is no first slice at 100%. The holding attracts 50% relief from the first pound.
Trusts get their own allowance
A separate £2.5 million allowance applies to the combined value of relievable agricultural and business property held in trust.
That is a meaningful structural point rather than a footnote: trust property is not simply aggregated with the estate for this purpose. How that interacts with existing settlements, and with the ten-year charges those settlements already face, is firmly a question for a solicitor rather than an article.
Who this actually hits
The government's own forecast is narrower than the coverage suggested. The number of estates claiming agricultural property relief affected by the reforms in 2026–27 halves from 375 to 185 once the threshold rises, and around 85% of estates claiming agricultural property relief in that year are forecast to pay no more inheritance tax than before.
That is worth holding alongside the headlines. The cap is real, and for the estates above it the cost is real, but it was never going to touch most farms.
What to actually check
- Is your planning built on the £1 million figure? If it was set up during 2025, it probably is.
- Did a spouse die before 6 April 2026? If so, a full £2.5 million allowance may be sitting unclaimed.
- Do you hold AIM shares for inheritance tax purposes? The basis of that decision has changed and the relief is now 50%, allowance or no allowance.
- Are you funding the tax rather than avoiding it? Where a bill is unavoidable, a policy written in trust pays the executors directly and outside the estate, which is often what stops a farm being sold to settle it.
- Is the property actually qualifying? APR and BPR have their own conditions on trading status, occupation and ownership periods that this article does not cover and that decide everything.
- Is anything held in trust? A separate allowance applies, with separate consequences.
What is set out here is the shape of the new rules, not advice about any particular farm, business or portfolio. Whether an asset qualifies for relief at all turns on trading status, ownership period and occupation tests that are fact-specific and frequently litigated. Anyone holding a farm or a trading business should be taking this to a solicitor or chartered tax adviser, and the April 2026 start date means that conversation is overdue rather than early.
Sources
- GOV.UK — Inheritance tax reliefs threshold to rise to £2.5m for farmers and businesses (opens in a new tab)
- GOV.UK — Agricultural property relief and business property relief changes (opens in a new tab)
- GOV.UK — Summary of reforms to agricultural property relief and business property relief (opens in a new tab)
- GOV.UK — Reforms to APR and BPR: application in relation to trusts (opens in a new tab)
- GOV.UK — How Inheritance Tax works: thresholds, rules and allowances (opens in a new tab)
This article is general information for a United Kingdom audience and describes the inheritance tax rules of England and Wales. It is not financial, tax or legal advice. Whether any particular asset qualifies for agricultural or business property relief depends on tests this article does not cover. Take advice from a solicitor or a chartered tax adviser before acting. Last reviewed 24 September 2026.
