Business Relief and Agricultural Property Relief: Planning for Assets Above £2.5 Million
By Georgia Holmes
Understand the combined £2.5 million allowance for Business Relief and Agricultural Property Relief from April 2026, including how 50% relief applies above the limit and what business owners and farming families should consider when planning succession.
For families who own businesses, farmland or other qualifying assets, Inheritance Tax (IHT) planning can be particularly important. These assets may represent years of work and a significant part of the family's wealth, but passing them on can create tax liabilities that affect succession plans or put pressure on other assets.
Business Relief (BR) and Agricultural Property Relief (APR) can reduce the value of qualifying assets subject to IHT. However, changes taking effect from 6 April 2026 limit the amount that can receive 100% relief under the new rules.
A combined £2.5 million allowance applies to qualifying business and agricultural property. Qualifying value above this allowance will generally receive 50% relief where it would otherwise qualify for 100% relief. The rules also include provisions for lifetime gifts, trusts and transfers of unused allowances between spouses and civil partners.
Understanding how the allowance works can help business owners, farmers and their families review their estate plans and consider how to pass on assets while maintaining financial flexibility.
What are Business Relief and Agricultural Property Relief?
Business Relief can reduce the value of certain business assets when calculating IHT. Depending on the asset and the relevant conditions, relief may be available at 100% or 50%.
Qualifying assets can include an interest in a trading business, shares in an unlisted company and certain business property. Not every business or investment qualifies. For example, businesses dealing mainly in securities, stocks, shares, land or buildings, or making or holding investments, are generally excluded.
Agricultural Property Relief can reduce IHT on qualifying agricultural property, such as farmland, farm buildings and certain farmhouses. The relief depends on factors including how the property is occupied or used for agricultural purposes, the ownership period and the type of interest held.
Both reliefs are subject to detailed eligibility requirements. Owning a business or farmland does not automatically mean the asset qualifies for 100% relief.
How does the combined £2.5 million allowance work?
From 6 April 2026, the first £2.5 million of qualifying property eligible for 100% Business Relief and/or 100% Agricultural Property Relief can generally receive 100% relief under the new allowance.
The allowance is shared between the two reliefs. It is not £2.5 million for business assets plus another £2.5 million for agricultural assets.
For example, someone who owns £1.5 million of qualifying business property and £2 million of qualifying agricultural property has £3.5 million of assets that would otherwise qualify for 100% relief. The combined allowance applies to the qualifying value, with the remaining value generally receiving 50% relief.
The allowance does not mean that the first £2.5 million of an estate is automatically free from all Inheritance Tax. It applies specifically to qualifying business and agricultural property. Other estate assets and liabilities must be assessed separately, alongside the ordinary nil-rate band, any available residence nil-rate band and other exemptions.
The legislation also provides for the unused allowance to be transferred to a surviving spouse or civil partner, potentially increasing the available allowance to £5 million. The transfer…