The Autumn Budget announced significant changes to reduce Agricultural Property Relief (APR) and Business Property Relief (BPR) under Inheritance Tax (IHT).
Effective from April 2026, the new rules abolish the unlimited 100 per cent tax relief on agricultural and business assets.
Instead, a new cap of £1 million on the 100 per cent will be introduced per individual, with any relief beyond the cap set at 50 per cent.
How does IHT work for property settled in trust?
Property settled in trust is subject to ongoing IHT charges rather than being included in the value of a settlor or beneficiary’s estate on death.
This legislation will have an impact on the IHT payable on property settled in trusts, where that property qualifies for APR or BPR and exceeds £1 million in value.
The main relevant property trust charges are:
- 10-year anniversary charges
- Exit charges
However, if the settled property is fully eligible for the 100 per cent rate of APR or BPR, the value will be reduced to nil, and it will not be subject to any 10-year anniversary charges or exit charges.
The Government is currently running an open consultation on how the rules will work in practice for both regular estates and property settled in trust.
What are the consultation questions, and how do I respond?
The consultation questions are:
- Are the rules on the application of the £1 million allowance for individuals sufficiently clear for transfers made on or after 6 April 2026? What are your views on this?
- Are the rules on the application of the £1 million allowance for 10-year anniversary charges and exit charges sufficiently clear for property settled on or after 6 April 2026? What are your views on this?
- What are your views on the proposal to standardise the calculation of Inheritance Tax exit charges, so that all exit charges are calculated based on unrelieved values regardless of whether the exit takes place before or after the first 10-year anniversary?
- What are your views on the proposed transitional provisions for qualifying agricultural and business property settled into a relevant property trust before 30 October 2024?
- What are your views on the proposed transitional provisions for qualifying agricultural and business property settled into a relevant property trust during the transitional period?
- What are your views on introducing a single £1 million allowance for 10-year anniversary charges and exit charges where a settlor has transferred property into multiple trusts on or after 30 October 2024?
- What are your views on introducing rules similar to the existing ‘related’ property provisions for Inheritance Tax, so that multiple holdings by the same settlor across multiple trusts can be connected for valuation purposes?
- What are your views on the application of the £1 million allowance to special trusts, age 18 to 25 trusts, and QIIP trusts?
- Do you have any further views on the application of the £1 million allowance to property that has been settled into trust?
Responses to the consultation should be sent by 23 April 2025 using the online form or by emailing answers to aprbpr.consult@hmrc.gov.uk.
We strongly encourage you to leave responses if your estate is likely to be affected by these rules, the full details of which can be found here.
Post consultation
After the consultation has ended, the Government will publish a response and carry out a technical consultation on draft legislation for the changes to APR and BPR.
This will help you to better understand exactly how the new APR and BPR rules affect your estate so that you can properly prepare for these changes.
We’ll be here to help you understand how you might be affected and help you to put plans in place that ensure the maximum amount of wealth is passed to the next generation.
For more information and guidance on changes to APR and BPR, contact our agriculture specialists today.