The 2026 changes to Agricultural and Business Relief: Everything you need to know

In the Labour Government’s inaugural Budget on 30 October 2024, significant changes to Agricultural Relief (AR) and Business Relief (BR) for inheritance tax (IHT) were announced. Now that these reforms have been in force since 6 April 2026, they are a central feature of the current IHT landscape for landowners, farmers, and business owners, following clarification provided during the 2025 consultation process.

This article outlines the regime now in place, its impact, and key planning considerations.

Current relief framework: A snapshot

Agricultural Relief (AR)

AR provides relief for qualifying “agricultural property,” including farmland, certain farmhouses, and buildings used for farming purposes. Relief remains available at 100% or 50%, depending on ownership and tenancy arrangements, and applies to the agricultural value of land.

Business Relief (BR)

BR applies to trading businesses or shares in such businesses, providing either 100% or 50% relief depending on the nature of the asset. For landowners, BR continues to supplement AR by covering non-agricultural assets within a business, such as commercial properties and holiday lets, where the overall business is “mainly trading.”

Key features of the current regime

The reforms have reduced the scope of full relief for higher-value estates. The core features are as follows:

1. £2.5 million allowance:
   • Assets that previously qualified for 100% relief now only receive full relief up to £2.5 million.
   • Above this threshold, such assets qualify for 50% relief.
   • The allowance applies across both AR and BR and remains transferable between spouses.
2. Trusts:
   • Trusts established before 30 October 2024 retain their own £2.5 million allowance.
   • Trusts created after that date by the same settlor share a single £2.5 million allowance.
3. Anti-forestalling measures:
   • Gifts made on or after 30 October 2024 fall within this regime where the donor dies on or after 6 April 2026.
4. Lifetime transfers:
   • Lifetime gifting has taken on increased importance, particularly where the donor survives seven years.

Practical implications

The current regime has fundamentally altered IHT planning for agricultural and business assets:

• On death: Assets exceeding the £2.5 million allowance are effectively subject to a 20% IHT rate.
• Lifetime gifts: Outright gifts of AR/BR assets can fall outside the IHT net entirely if the donor survives seven years.
• Trusts: Establishing new trusts can trigger an upfront IHT charge of 10% (rising to over 11% if the settlor funds the tax), with a further charge if death occurs within seven years.

Strategic considerations for farmers and business owners

1. Lifetime gifting: Passing assets during lifetime is now a key planning tool. Term life assurance can help mitigate the risk of death within the seven-year period.
2. Reviewing Wills: Couples should review and update their Wills to ensure both £2.5 million allowances are used effectively.
3. Maintaining existing trusts: Historic trusts remain advantageous, as they retain separate allowances.
4. Succession planning: Families should revisit succession strategies to reflect the current tax environment, balancing tax efficiency with control and continuity.
5. Diversification decisions: While diversification remains important, the reduced IHT advantage may lessen the incentive to expand into certain trading or environmental activities.

Broader impact

The reforms are already influencing behaviour, with potential implications for land values as demand for IHT-efficient assets adjusts. Traditional structuring approaches, such as Balfour-style arrangements combining agricultural and non-agricultural assets, are now less effective under the current rules.

Next steps and how Moore Barlow can help

With the regime now firmly in place, proactive planning remains essential. Even at this stage, early review of structures and succession plans can make a significant difference to overall tax outcomes.

At Moore Barlow, our team of experienced lawyers can help you navigate the current rules, structure your assets effectively, and plan for a tax-efficient future. Contact us today to discuss how these changes might affect your estate and how we can assist in preserving your legacy.