Tax strategy for landowners before the April 2026 changes

There are just under two months before significant changes come into effect for the taxation of agricultural and business property in the UK. From 6 April 2026, property which is eligible for Agricultural Property Relief (APR) and Business Property Relief (BPR) will no longer receive 100% relief from inheritance tax (IHT).

Instead, full relief will be capped at £2.5m for each individual, with any excess attracting 50% relief. In practice, this means that the value of eligible property above any available allowances will be subject to IHT at half the usual rate – 20% on death, 10% on transfers into trust and 3% on the 10-year anniversaries of relevant property trusts.

Updates

There have been two significant changes since the measures were first announced in the 2024 Autumn Budget. The first was that the allowance will be transferrable between spouses (announced in the 2025 Autumn Budget); and the second was that the allowance would be increased from £1m to £2.5m per person (announced on 23 December 2025). These were both very welcome changes, but the wider measures continue to raise concerns for farmers and business owners.

A recap of the changes from 6 April 2026

• £2.5m: each individual will have a £2.5m allowance for APR and BPR property.
• The seven-year rule: the available allowance will be measured by reference to qualifying transfers made in the preceding seven years, broadly mirroring the way in which the nil-rate band operates.
• Transferable: the full amount of any unused relief allowance may be passed to a surviving spouse or civil partner, operating in the same way as the standard nil-rate band is transferable between spouses.
• Trusts: most existing trusts will have their own allowance. However, where a settlor establishes more than one trust after 30 October 2024, a single £2.5m allowance will be shared between those trusts. Trusts settled before that date will each retain access to a standalone £2.5m allowance.
• Payment options: the IHT due in respect of APR/BPR property can be paid by interest-free instalments over 10 years, meaning that the effective rates of tax are 2% per annum for IHT on death, 1% per annum for transfers into trust and 0.3% per annum for IHT on trust 10-year anniversary charges.

Actions and opportunities

The next few months present a unique opportunity to review your estate planning and transfer or change the structure of how agricultural and business assets are owned. We have set out the principal considerations below:

Review wills and partnership agreements

Putting a will in place or reviewing your existing will is essential. Given the transferability between spouses, it is no longer necessary to ensure that the allowance is used on the first death. If structured correctly, married couples and civil partners can leave £5m worth of eligible assets to the next generation free of IHT (in addition to using any other allowances, such as the nil-rate band and transferable nil-rate band). Reviewing partnership agreements will also be important to ensure that interests are capable of being passed to a spouse in line with a will – not always a given.

Lifetime gifts

Outright gifts of relievable assets can be made without an upfront tax charge because capital gains tax (CGT) can be ‘held over’ for business assets that qualify for APR or BPR, with the recipient inheriting the donor’s base cost. If the donor survives the gift by seven years, there will be no IHT charge on the transfer. Outright lifetime gifts are the surest way of deferring an IHT charge, as long as the donor can afford to give away the asset(s) and is likely to survive the gift by at least seven years.

One point not to overlook, however, is the CGT uplift that occurs when assets pass on death (rather than passing as a lifetime gift); this means that latent gains are washed out and the beneficiary acquires those assets at their date of death value. This can be a valuable tool if assets stand at significant gains and are subsequently sold.

Wind up or make significant exits from existing trusts

Where a clear successor is in place and ready to assume responsibility for the business or the estate, trustees may consider appointing qualifying assets to them before 5 April 2026 or before the trust’s next 10-year anniversary (provided the trust was created before 30 October 2024). Any IHT exit charge should be covered by relief in full, and holdover relief is likely to apply to defer CGT. Alternatively, where succession planning is less certain, trustees may instead decide to retain older trusts, the benefit of which is that each trust will continue to benefit from its own £2.5m allowance.

Settle new trusts

Settling a new trust to hold relievable assets before 5 April 2026 will allow a landowner to get these assets out of their estate and into trust with the IHT entry charge covered by relief in full. From 6 April 2026 onwards, this transfer into a trust will incur an IHT entry charge at an effective rate of 10%. While the new trust will be subject to the new IHT rules (10-year charges and exit charges), the trustees will have certainty about when those IHT charges will fall (at least every 10 years), rather than having to plan for a more significant liability on death.

Life interest trusts

Trusts with a qualifying interest in possession (life interest trusts) will continue to be taxed on the life tenant’s death. The life tenant’s £2.5m allowance will be shared by the trustees and the executors of their estate. A life tenant could decide to give up their life interest now, provided they can manage without the income. What happens next depends on the trust’s terms. If the trust fund passes outright to an individual or individuals, it is taxed in the same way as a lifetime gift: if the trust assets qualify for APR and/or BPR, it is likely that there will not be a CGT charge (holdover relief will be available), and no IHT charge if the life tenant survives seven years or more. If, on giving up the life tenant’s life interest, the trust assets remain in trust – for instance, held on discretionary trusts for the next generation and beyond – this is taxed in the same way as settling a new trust (see above). There is therefore a time-limited opportunity to consider whether this could benefit the next generation of beneficiaries.

Valuation

Set the wheels in motion to obtain an updated valuation of the assets at the first opportunity. Accurate and up-to-date valuations will be especially important for land and business owners seeking to make use of the limited window to transfer assets to the next generation or into or out of trust. This is also likely to be the first time these assets been valued for IHT purposes, so much greater sensitivity and accuracy will be required. Valuing the interests in a farming partnership or private limited company can be difficult – especially where minority interests lead to discounts being applied – and may lead to queries and protracted negotiations with HMRC. Robust valuations will be critical for calculating future IHT charges, and so landowners should be especially careful to consider the non-agricultural value of land (ie hope or development value) as well as the character and suitability of farmhouses and outbuildings.

Cashflow planning

Landowners, business owners and trustees should begin planning now for how future IHT liabilities will be funded. Life insurance may be an appropriate solution in some cases, but careful consideration will be needed to ensure there is sufficient and sustainable liquidity to meet ongoing premium payments over the long term. It may also be sensible to identify assets that could be sold (in full or part) to generate cash if required. The option to pay the IHT in interest-free instalments will be a valuable tool.

The changes coming into effect from 6 April 2026, together with the timing of trust 10-year anniversaries, make this a critical period for landowners and trustees to review their existing structures and succession planning. The new regime will place a renewed emphasis on having a clear and proactive approach to lifetime planning, as well as utilising reliefs on death. Now is the time to move from tentative discussions to active planning, but beware the pressure to transfer assets prematurely if there are other factors at play and, most importantly, do not let the (tax) tail wag the dog.

This article is part of our Rural Estates Newsletter 2026, click here to read the full edition.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, February 2026