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The Final Straw? – Key Changes to Agricultural and Business Property Relief (APR and BPR) and What They Mean for the Future of Farms

Tractors descending on Whitehall, Jeremy Clarkson up in arms and landowners across the country fearing for the future of farming. So, what’s it all about? Here’s what we think farmers, landowners and business owners need to know about the substantial changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), set to take effect from 6 April 2026.

What are APR and BPR?

APR and BPR are reliefs that reduce inheritance tax (IHT) on agricultural and business assets, intended to ensure that family farms can remain operational following a change of ownership. IHT is charged on transfers of value (e.g property, savings and personal belongings) at a standard rate of 40%.

• APR historically provided 100% or 50% relief on agricultural property, such as farmland or certain farm buildings, to reduce IHT on estates.
• BPR offered similar relief for business property, such as shares in a family trading business, reducing IHT on assets outside agricultural property.

What is Changing From 6 April 2026?

£1 million relief cap

Following the Government’s Autumn Budget, the proposal is that only £1 million of an estate’s agricultural and business property will now qualify for 100% relief from IHT. If an estate consists of both agricultural and business assets, the £1 million cap will be divided between the two based on their value.

The Government have stated that this is expected to affect the “wealthiest 500 estates,” however the uproar from the farming community goes some way to suggest the widespread impact this cap will have. It remains to be seen if the clamour in Westminster will be enough to prevent this change.

Let’s consider an example:

A farmer owns an estate worth £8 million which contains a farm worth £6 million and a business worth £2 million. On the farmer’s death, the estate would be subject to the £1 million 100% relief as follows (for illustrative purposes, we are assuming that there is no available nil rate band):

• • £750,000 relief for the farm (75% of £1 million).
  • £250,000 relief for the business (25% of £1 million).

The remaining £7 million of the estate will be subject to reduced relief (see below).

50% relief beyond the £1 million cap

Once the £1 million cap is exceeded, assets will qualify for 50% relief from IHT. Assets currently receiving 50% relief will not use up or be affected by the new allowance, but any unused allowance will not be transferable between spouses and civil partners. Put simply, this results in an effective IHT rate of 20% on the value of APR qualifying assets exceeding the £1 million cap.

Using the example above, the remaining £7 million on our farmer’s estate would receive 50% relief, leaving £3.50 million taxable value, or framed differently, a 20% tax on the £7 million excess.

The inheritance tax that will be owed on the estate would be £1.4 million.

This tax can also be paid interest-free, in instalments, over a 10 period, which may help ease the financial burden farmers will now face.

Lifetime transfers and trusts 

From 30 October 2024, these new caps and reliefs will also apply to lifetime transfers made within the seven years before death, if the donor dies on or after 6 April 2026. Similarly, trusts will receive 50% relief on  ten-year IHT charges and any smaller charges when property exits the trust. This may mean that farmers could transfer large parts of their estate into a “discretionary” or “interest in possession” trust now without an IHT liability arising immediately, although relevant property charges will likely arise for the trustees.. The Government will publish a consultation in early 2025 on the detailed application of charges on property within trusts.

This means that if our farmer made a lifetime gift of his £6 million farm to his children today and then died two years after making the gift, the transfer would be charged to IHT, subject to the new reliefs set out above. However, if our farmer made the gift today and died on 6 April 2032 (i.e. over seven years since making the gift) there would be no IHT liability for his children.

Changes to BPR

BPR will now apply at 50% instead of 100% for shares in businesses not listed on “recognised stock exchanges,” such as AIM (Alternative Investment Market) shares.

What Does This Mean For The Future of Farming?

For farmers and business owners, these changes to APR and BPR are certainly unwelcome. There is a divide between the farming community and the Government, with farmers arguing that the high capital value of their estates is disproportionate to the low income that they generate. Their major concern is that the Government’s reduction of APR and BPR will result in land being sold piecemeal to meet the new IHT liability. This, in turn, could lead to estates becoming unviable and farmers having to sell up altogether.

It is more crucial than ever to seek advice on wealth protection and planning opportunities as early as possible. With an understanding of what an estate consists of, there are measures, such as lifetime gifts or the formation of trusts, which could help lessen the burden that these changes will bring.

Please do contact the Private Wealth & Tax team to understand the implications for you and/or your clients.

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Tips to Speed Up Your Commercial Property Transaction

All parties want a smooth and quick transaction. The following simple steps can make a significant impact on the speed and efficiency of your commercial property transaction. 

Landlord/Seller:

1. It is a useful exercise for your solicitors to review the title regularly and remove any entries relating to expired leases or agreements. This prevents last minute applications to the Land Registry having to be made and dealing with requisitions at a time when your solicitor should be exchanging or completing the documents. 
2. Another helpful practice is for your solicitors to maintain a concise data room with up to date title information including deeds and documents referred to in the title. This enables title information to be issued swiftly and helps facilitate the other side’s due diligence process. 
3. It is also beneficial for you and your solicitors to procure relevant consents (such as the lender’s or superior landlord’s consent) or third party deeds of covenant which may be required before completion can take place. It is important to deal with these early on especially if they relate to a third party who has little or no interest in the transaction and may not appreciate the urgency of the situation e.g. consent of the owner of a neighbouring property in respect of a restrictive covenant on the title. 
4. It is handy if the landlord has documents such as Energy Performance Certificates, Fire Risk Assessments, asbestos surveys, insurance schedule, service charge budgets and other management information readily available and even better if these are already in the solicitors’ data room. These can be issued at the outset of the transaction along with replies to CPSEs and will prevent additional enquiries being raised in this regard.
5. The lack of a Land Registry compliant lease plan can often lead to delays. This can usually be the case for lease renewals where a previous plan is no longer Land Registry compliant. A landlord and its legal team should always consider whether a new plan is required and commission it at an early stage to prevent delays.

Tenant/Buyer:

1. A recurring cause of delays which we come across is that fit-out plans are not ready to be submitted to the landlord for approval at the appropriate time. This can cause delays especially if the fit-out requires an element of structural works such as a lift or a staircase to be installed. This can also be problematic if the tenant needs to carry out certain suitability tests to floor slabs or walls in which case an access licence may be required. Having the fit-out plans ready at an early stage can significantly speed up a transaction, as it allows time to deal with any further requirements the landlord may have in respect of the works.
2. Late requests for additional rights can delay the process. If you have any specific requirements regarding signage, access, installing plant such as air conditioning units or using common areas for events etc., it is best to incorporate these into the Heads of Terms.
3. Please ensure that you confirm details of the tenant entity at an early stage. If this is a newly incorporated SPV then the landlord may well require additional security such as a rent deposit or a guarantor and therefore this can lead to further negotiations at a late stage.

Common: 

1. Execution of documents- if either party is signing by power of attorney or trustees are involved, please make sure you provide your lawyers with the original instrument at an early stage as the other side will most likely request a certified copy. 
2. If either the landlord or the tenant is an overseas entity, please ensure that you make arrangements to obtain a legal opinion by overseas lawyers at an early stage as this will likely be a requirement of either side. 

If you require assistance with a commercial property transaction, contact Aisha Anjum.

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UK-India Trade Negotiations To Recommence In 2025

The UK is set to resume negotiations with India over a free trade agreement in the new year, following a break in discussions due to the recent elections in both nations, as confirmed by Prime Minister Keir Starmer’s office on Monday. 

Prime Minister Starmer aims to foster a “new strategic partnership” with India, with a focus on strengthening cooperation in key areas such as security, education, technology and climate change. This comes after Starmer’s meeting with Indian Prime Minister Narendra Modi at the G20 summit in Brazil, where both leaders discussed the path forward for UK-India relations. 

“A new trade agreement with India will generate significant economic benefits, supporting jobs and prosperity across the UK,” said Starmer, whose Labour Party assumed office in July. 

In addition to his discussions with Prime Minister Modi, Starmer also engaged with Chinese President Xi Jinping, urging the establishment of more “consistent and durable” ties between the two countries, particularly in areas such as trade, the economy, and climate change. 

With a commitment to securing the fastest sustained economic growth within the G7, Starmer is positioning the UK to leverage trade agreements with key global partners. The Organisation for Economic Co-operation and Development (OECD) has predicted that UK growth in 2025 will be the lowest among G7 nations, emphasising the importance of these international negotiations. 

The previous Conservative administration had engaged in extensive trade talks with India, but these discussions stalled in March due to the Indian elections. A British official stated that finalising an agreement ahead of the Indian elections was not feasible. 

Bilateral trade between the UK and India, the world’s fifth- and sixth-largest economies, was valued at £42 billion ($53.2 billion) in the 12 months leading up to June, with UK exports to India accounting for £16.6 billion.

Ahead of India’s general election earlier this year, which secured Modi a third consecutive term, there were indications that India would prioritise completing trade deals with the UK and Oman. 

However, previous challenges in the negotiations have centred on issues such as India’s high import duties on British whiskey and its demand for greater visa access for Indian students and businesses. 

“India remains a crucial trading partner for the UK. We are optimistic that a mutually beneficial trade agreement can be reached, benefiting both nations,” commented British Business Minister Jonathan Reynolds. 

If you or your connections require legal advice, please contact Jayesh Jethwa or fill out our enquiry form below.

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