Policy paper

Agricultural property relief and business property relief reforms

Published 21 July 2025

Who is likely to be affected

This measure affects estates of deceased persons and their personal representatives in circumstances where the estate contains agricultural property (land or pasture used for farming and appropriate buildings and farmhouses) or business assets (shares, property and shared buildings, machinery).

This measure also affects individuals who make chargeable lifetime transfers (for example, gifts or settlements into trust) of agricultural or business property, and trustees of settled agricultural and business property who are liable to periodic Inheritance Tax and exit charges.

General description of the measure

In addition to existing nil-rate bands and exemptions, a new £1 million allowance will apply to the combined value of property in an estate qualifying for 100% business property relief or 100% agricultural property relief. Relief at the lower rate of 50% will apply to the value of any qualifying relievable property over £1 million. Combined with the nil-rate bands, this means a couple could pass on up to £3 million tax-free between them.

A £1 million allowance will also apply to the combined value of relievable agricultural and business property in trusts.

The rate of business property relief available will be reduced from 100% to 50% in all circumstances for shares admitted to trading on recognised stock exchanges designated as ‘not listed’. The rate of relief will also reduce from 100% to 50% for qualifying shares listed on foreign exchanges which are not a recognised stock exchange.

The option to pay Inheritance Tax by equal annual instalments over 10 years interest-free will be extended to all property which is eligible for agricultural property relief or business property relief.

The method to calculate rates of Inheritance Tax on trust exit charges will be standardised so that all exit charges will be calculated based on unrelieved values, regardless of whether the exit takes place before or after the first 10-year anniversary.

Policy objective

The purpose of the reforms is to raise revenue to ensure the sustainability of the public finances and to fund public services, whilst continuing to support farms and businesses by targeting the reliefs to make them fairer.

Background to the measure

Agricultural property relief and business property relief reduces the value of assets when working out how much Inheritance Tax has to be paid. Since March 1992, relief of up to 100% has been available on qualifying business and agricultural assets.

A very small number of claimants each year claim a very significant amount of agricultural property relief and business property relief. In 2021 to 2022 (the most recent data available), 40% of the total Exchequer cost of agricultural property relief went to the top 7% of claims This means just 117 estates benefited from £219 million in tax foregone. 73% of estates claimed for agricultural property below £1 million, and the median value of assets qualifying for agricultural property relief overall was £486,000.

In 2021 to 2022, 53% of the Exchequer cost of business property relief went to just the top 4% of claims. This means just 158 estates benefited from £558 million in tax foregone. 87% of estates claimed for business property below £1 million, and the median value of assets qualifying for business property relief overall was £200,000.

At Autumn Budget 2024, the government announced it would reform agricultural property relief and business property relief from 6 April 2026. A detailed summary of the reforms, including statistical analysis of 2021-22 data, was published at Autumn Budget 2024 and a detailed explanation on the reforms to agricultural property relief was published on 5 November 2024.

The government published a technical consultation on how the reforms would apply to trusts on 27 February 2025. The consultation included announcements on the broader extension of interest-free instalments and standardisation of exit charge rate calculations. A summary of responses to the consultation was published on 21 July 2025.

Detailed proposal

Operative date

The measure will have effect from 6 April 2026.

Transitional rules mean that the operative date for chargeable lifetime transfers and trust charges will have effect for deaths occurring on or after 6 April 2026 where lifetime gifts were made on or after 30 October 2024 and the transferor dies on or after 6 April 2026, and within 7 years of making the gift.

The measure will have an effect on trusts existing before 30 October 2024 from the next 10-year anniversary occurring on or after 6 April 2026.

For new trusts, or existing trusts which did not contain agricultural or business property on or before 30 October 2024, the measure will have an effect from 30 October 2024 regarding the availability of 100% relief, as it will depend on the value of transfers of qualifying property made into the trust on or after 30 October 2024.

Current law

Inheritance Tax legislation is provided for in the Inheritance Tax Act 1984.

Part V (miscellaneous reliefs), chapters 1 and 2 provide relief for business property and agricultural property respectively.

Part III (settlements without interest in possession and certain settlements in which interests in possession subsist) contains the rules on settled property, with chapter 3 of that part containing the separate charging regime for property held in trusts.

Part VI (valuation) contains the valuation rules in relation to Scottish agricultural leases.

Part VIII (administration and collection) contains the rules on the property on which inheritance tax can be paid by instalments.

Proposed revisions

The government will introduce legislation in Finance Bill 2025-26 to amend the Inheritance Tax Act 1984 with effect from 6 April 2026.

Sections 104 (business property relief) and 116 (agricultural property relief) will be amended to refer to a new 100% relief allowance, with a 50% rate applying for everything over that allowance, and to provide that the rate of business property relief available on shares will be 50% in all cases where they are:

• admitted to trading on a recognised stock exchange which are not ‘listed’
• qualifying shares listed on foreign exchanges which are not a recognised stock exchange

A new chapter 2A will be inserted to provide for a 100% relief allowance for individuals and a 100% trusts relief allowance. Commencement provisions will be made in the Finance Bill for transitional arrangements in respect of transfers before 6 April 2026 and trusts existing before 30 October 2024.

Section 69 will be amended so that all relevant property trust exit charge rates are calculated based on values before agricultural property relief or business property relief regardless of whether the exit takes place before or after the first 10-year anniversary.

Exemption for certain Scottish agricultural leases is preserved by amending section 177.

Section 227 (payment by instalments — land, shares and businesses) will be amended so that the Inheritance Tax liability, in relation to all shares that qualify for business property relief will be able to be paid by instalments, without having to satisfy the conditions in section 228. Amendments to section 234 (interest on instalments) extends interest relief to the instalment payments on these shares.

Summary of impacts

Exchequer impact (£ million)

2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030
Empty	Empty	+230	+495	+520	+520

These figures are set out in Table 5.1 of Autumn Budget 2024 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2024.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

Inheritance Tax is a wealth transfer tax on the estate (the property, money and possessions) of someone who has died and on assets in relevant trusts.

From 6 April 2026, this measure will increase Inheritance Tax liabilities for a small number of estates each year and therefore reduce the inheritance received by beneficiaries. HMRC does not hold complete data on the beneficiaries of estates because it is not required for the administration of Inheritance Tax.

The reforms are expected to result in around 2,000 estates across the UK paying more Inheritance Tax in 2026 to 2027 than they would previously have been liable to pay. In 2026 to 2027, this represents 0.3% of all UK estates and 4.5% of taxpaying estates. Of the 2,000 estates, up to 520 estates claiming agricultural property relief (including those also claiming business property relief), are expected to pay more Inheritance Tax in 2026 to 2027. This means almost three-quarters of all estates claiming agricultural property relief in 2026 to 2027, including those that also claim for business property relief, will not pay any more Inheritance Tax as a result of the changes. Of the 2,000 estates, up to around 1,500 estates only claiming business property relief are expected to pay more Inheritance Tax in 2026 to 2027, of which around 1,000 of these are expected to only hold shares designated as ‘not listed’ on the markets of recognised stock exchanges. This means three-quarters of all estates only claiming business property relief in 2026 to 2027, excluding those only holding shares designated as ‘not listed’, will not pay any more Inheritance Tax as a result of the changes.

These estimates are static and assume no change in behaviour, such as tax planning, which may reduce the numbers of estates affected. As such, these estimates should be viewed as a maximum. The Exchequer impact above includes the anticipated behavioural response whereby individuals restructure their estates by making greater use of other available reliefs and exemptions.

Personal representatives for the deceased’s estate, individuals who settle agricultural and business property into trusts and their respective trustees already need to undertake some administration to report and pay Inheritance Tax. Where they plan to claim the reliefs they will need to familiarise themselves with the changes.

The majority of personal representatives claiming the reliefs will not face additional ongoing administrative burdens. For the estates which only hold shares that are not listed, there are no new obligations as the only change will be an update to the rate of the relief and there will be no change to how they interact with HMRC.

Where the estate now seeks to claim the relief for assets in excess of £1 million, personal representatives will need to undertake an additional calculation at the reduced 50% rate. This will be reflected on updated forms and guidance.

Individuals who settle property into trust and trustees will need to ensure they keep records of how they have used the allowance, and also have to undertake an additional calculation at chargeable events for assets in excess of £1 million. Trustees will need to calculate a different rate for an exit after a 10-year anniversary. This measure will affect these individuals’ experience of dealing with HMRC as it will require some additional administration. HMRC will provide guidance and tools to support individuals, trustees and personal representatives to calculate the Inheritance Tax that is due.

The measure will have an impact on families going through bereavement and those planning for succession, where the estate has an increased Inheritance Tax liability as a result of this measure. The policy is not expected to have a significant impact on family formation, family stability or family breakdown.

Equalities impacts

The impact of this measure on groups with protected characteristics is expected to be proportionate with the population of the estates claiming the reliefs, and where protected groups are overrepresented there will be a disproportionate impact. However, as detailed above, individuals may seek to restructure their affairs in response to changes, depending on their personal circumstances.

HMRC collects data about the age, sex and marital status of the deceased. In 2021 to 2022, the most recent data available the majority of agricultural property relief (84%) and business property relief (79%) was claimed by the estates of individuals aged 75 or over.

In 2021 to 2022, the majority of these reliefs were claimed by men rather than women (62% of agricultural property relief, 57% of business property relief). Around half of those estates belonged to widows or widowers (47% for agricultural property relief, 51% for business property relief), and around a quarter were married (22% for agricultural property relief, 23% for business property relief).

HMRC does not hold data on the other protected characteristics of deceased individuals with estates liable for Inheritance Tax and so cannot determine conclusively if there are any other equality impacts.

This measure will have an indirect impact on the beneficiaries of estates or trusts liable to Inheritance Tax as the value of the estate or trust after Inheritance Tax is paid will be lower than it otherwise would have been. HMRC does not hold complete data on the beneficiaries of estates or trusts, therefore it is not possible to assess whether there any disproportionate impacts to any groups sharing protected characteristics.

Impact on business including civil society organisations

This measure concerns taxation of individuals, estates and trusts. The majority of those submitting Inheritance Tax returns are agents and whilst some individuals will choose family members to be trustees of their estates, others may appoint professional estate planners and financial advisers. This measure will have a negligible impact on these businesses.

One-off costs may include overall business familiarisation with the changes, upskilling staff on process changes, and updating software to facilitate completing updated forms. Ongoing costs will relate to the same administrative activities as those for non-professionals detailed under ‘impact on individuals, households and families’. This measure is expected to affect these businesses’ experience of dealing with HMRC as in a minority of cases it will require professional personal representatives and trustees to add to their existing administrative processes when claiming the reliefs. As with non-professionals, HMRC will mitigate the impact on trustees and personal representatives by providing guidance and tools to enable them to calculate the Inheritance Tax that is due.

How individuals structure their business and agricultural assets in response to this measure, including succession planning, will depend on their personal circumstances. Similarly, the means by which individuals, personal representatives or trustees pay the Inheritance Tax liability, for example through business assets or through other assets within the estate or trust, as a lump sum or through interest-free instalments, will depend on personal choices and individual circumstances.

The proposal is expected to have a limited impact on civil society organisations such as those who support bereaved families and provide advice on relevant issues (such as Citizens Advice). This may include one-off costs such as familiarisation. There are not expected to be any further one off or continuing costs.

Operational impact (£ million) (HMRC or other)

Current estimates of HMRC costs to deliver the measure are £7.5 million in total over the scorecard period based on existing systems. These costs are primarily staffing costs to support the administration of this measure. As with all measures, costs will be further refined as data is collected on the behavioural response to the changes.

Other impacts

Food security

The UK has robust domestic production, and these reforms will only affect a small number of estates. Key aspects of UK food security include prices and physical availability, and changes to inheritance tax reliefs are not expected to have a material impact on either. UK agricultural prices (including for domestic production) are typically a function of international prices. Marginal changes in domestic production, if any, would not affect this relationship and would not be expected to have a material impact on UK prices. Furthermore, changes to Inheritance Tax reliefs would not be expected to impact the UK’s ability to source imports from international markets. Overall, this measure is not expected to have a material impact on food security.

Monitoring and evaluation

The measure will be monitored through information collected from Inheritance Tax returns and communication with affected taxpayer groups.

Further advice

If you have any questions about this change, email the Inheritance Tax Policy Team at abrbpr.consult@hmrc.gov.uk.