Inheritance Tax Reforms and the Impact on Businesses and Agricultural Succession

The latest UK Budget announcement has introduced significant changes to Inheritance Tax (IHT), especially in relation to Business Property Relief (BPR) and Agricultural Property Relief (APR) set to take effect in April 2026.

The reforms reduce both APR or BPR to 100% on assets up to £1 million and 50% on amounts above that. This significant shift in relief poses unfathomable challenges for business owners and farming communities throughout the UK.

Historically family-run enterprises have relied upon BPR and APR as a vital relief to assist with family succession allowing assets to be passed between generations without prohibitive tax burdens. Yet, with reliefs now capped, the financial landscape of succession planning is changing dramatically.

Farming families, who have been relying on APR for multigenerational transfers of land and assets, are now at the mercy of abhorrent IHT liabilities which is most cases do not have the income streams to service the burden.

Farmland values will almost always far exceed the £1 million threshold, meaning many agricultural estates will face substantial tax liabilities upon the death of the landowner.

For Example,

A family farm ran by father and son worth £3m, which previously could be passed down to the son on the death of his father free of tax, will now shoulder a liability of £400K.

The Strain on Businesses and Farming Succession

The loss of BPR and APR at full rates will also be felt acutely by business owners during periods of transition, particularly following the unexpected death of a director or major shareholder. With reduced reliefs, businesses may find themselves facing immediate tax liabilities that, without adequate planning, could force asset sales or divert funds needed to keep the business running. This financial burden can be especially destabilising in rural and farming communities, where businesses often have significant asset values tied up in land and physical infrastructure, both critical for long-term operations.

The farming sector has been vocal about the importance of retaining APR to support responsible land stewardship and to enable seamless intergenerational transfer. With the Labour Government’s new budget, many families will now need to rethink their succession strategies to ensure that they can maintain their land, operations, and quite frankly survive.

Proactive Planning for Business Continuity

Given the impending changes, it’s essential for business and farm owners to take a proactive approach to succession planning. Reviewing asset values and understanding the IHT implications under the new rules is a critical first step. For many, this may include considering restructuring options, exploring trusts, or other tax-efficient vehicles to help manage potential liabilities.

Working closely with your accountant can provide tailored strategies that address each business’s unique circumstances. Whether through optimised asset allocation, alternative reliefs, or succession structures, effective planning is key to minimising the tax impact on business continuity and family legacies.

Looking Ahead: Securing the Future

The upcoming changes to IHT represent a significant shift in how business and agricultural assets are taxed upon inheritance. As the 2026 implementation date draws nearer, timely action will be essential in preserving both financial stability and heritage within the UK’s most valuable family-run businesses.

Now is the time to engage with experts, secure the right policies, and take the steps needed to protect your business’s future, contact EQ today.