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In her Budget speech on 26 November 2025, the Chancellor, Rachel Reeves, announced that the £1 million allowance for agricultural property relief (APR) and business property relief (BPR) will be transferable between spouses and civil partners, with effect from 6 April 2026. This constitutes a welcome, albeit late, concession; it was hoped that more extensive amendments would be announced to the draft legislation published on 21 July 2025.
The APR/BPR allowance will be frozen at £1 million until 5 April 2031.
Before the 2024 Autumn Budget, all assets qualifying for APR or BPR attracted relief from Inheritance Tax (IHT) at the rate of 100% or 50%, depending on certain conditions being met. In the 2024 Budget, the Government announced the introduction of a £1 million cap on 100% relief for APR and BPR, with effect from 6 April 2026. The balance of APR/BPR assets qualifying for 100% relief, over and above the £1 million allowance, will now qualify for relief at 50%, and therefore will be taxed at 20%.
In response to the Government Consultation earlier this year, farming families, the NFU and practitioners lobbied for various changes to be made to the new £1 million allowance. One of those changes related to the transferability of the allowance following the death of a spouse/civil partner. It was argued that if the £1 million allowance had not been used in full on the first death, it should be possible to transfer any unused balance to the surviving spouse/civil partner, and be available to set off against any APR assets held by the survivor on their subsequent death.
Rachel Reeves confirmed this amendment in her Budget speech, enabling any unused allowance to be used on the second death, even if the first death occurred before 6 April 2026. This is welcome news and brings the relief in line with the nil rate band (the tax-free slice for IHT, currently set at £325,000), which is also transferable between spouses/civil partners.
This change is a welcome development and will mean that a married farmer would no longer need to leave £1 million of agricultural assets directly to his/her children under his/her Will to make use of the £1 million allowance. Instead, the entire estate could be left to the survivor on the first death, and the £1 million allowance carried over until the second death, at which point £2 million of relief will be available.
In the meantime, sadly, some farmers and small business owners will already have taken action and made lifetime gifts to their spouse/civil partner, children or into trust, in some cases requiring extensive restructuring at significant costs. For those that have not taken action, it may be of some comfort, but the concession is not as far-reaching as many would have hoped.
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