Business Property Relief and Agricultural Property Relief (Inheritance Tax)

Description

The main Inheritance Tax reliefs for passing on a trading business or a farm, and the subject of the biggest change in this area for a generation. Until 5 April 2026 qualifying business and agricultural property attracted unlimited 100% relief. From 6 April 2026 a capped allowance applies: the first £2.5 million of an individual's combined business and agricultural property gets 100% relief, and anything above that gets 50% — an effective Inheritance Tax rate of 20% rather than 40% on the excess. Any unused allowance is transferable to a surviving spouse or civil partner, so a couple can pass on up to £5 million at the full rate, on top of the ordinary nil-rate bands. Shares traded on but not listed on a recognised stock exchange (AIM shares, most notably) get 50% relief and sit outside the £2.5 million allowance entirely. Tax on business and agricultural property can be paid in equal annual instalments over 10 years, interest-free in most cases. The usual 2-year ownership requirement before death still applies.

Eligibility summary

• Available across the whole UK (England, Scotland, Wales, and Northern Ireland).

Notes

RESOLVED 25 Oct 2026 from the legislation and HMRC guidance, which agree on £2.5 million. Finance Act 2026 (2026 c. 11), section 65 and Schedule 12: the new allowance provisions in the Inheritance Tax Act 1984 set the 100% relief allowance at '£2.5 million' (s.124D), cut business and agricultural relief above the allowance to 50%, allow unused allowance to pass to a surviving spouse or civil partner (s.124E), set trust allowances at £2.5 million (ss.124H to 124K), and apply to 'transfers of value made, and occasions on which tax is chargeable ... on or after 6 April 2026' (Schedule 12, paragraph 17). HMRC's Inheritance Tax Manual (IHTM24140, updated 7 April 2026) states the value of qualifying property subject to 100% relief is limited to £2.5m for transfers on or after 6 April 2026, or up to £5m with a transferred allowance from a pre-deceased spouse or civil partner. GOV.UK's 'what qualifies for business relief' guidance gives the same cap, the transfer of unused allowance, the 2-year ownership requirement and the exclusion of investment businesses. Unquoted shares traded on a recognised exchange such as AIM (IHTA s.105(1)(aa), inserted by Schedule 12) get 50% relief and, per IHTM25570, are 'not relevant to the 100% relief allowance'. The government's 23 December 2025 news story gives the £2.5 million allowance, spouse transferability, 50% above it and payment 'in equal instalments over 10 years interest free'; IHTM25580 says the instalment option is available from 6 April 2026 and payments 'will be interest-free in most cases' (not in every case). The superseded figure explained: the Autumn Budget 2024 announced £1 million, the government raised it to £2.5 million on 23 December 2025, and GOV.UK's 'Summary of reforms to agricultural property relief and business property relief' policy paper (published 30 October 2024, no later update shown) still says £1 million and non-transferable. That page is out of date; the statute and the manual govern. Take professional advice rather than relying on a directory summary.

Applicant type

The personal representatives of a deceased owner's estate, or the transferor of a lifetime gift; also applies to qualifying property held in trust.

Ownership period

The property must generally have been owned for at least 2 years before the transfer.

Qualifying property

Business relief: an interest in an unquoted trading business, or shares in an unquoted trading company (investment businesses are excluded). Agricultural relief: the agricultural value of farmland, farm buildings and farmhouses occupied for agricultural purposes.