Business and Agricultural Property Relief – draft law and updates announced

In Autumn Budget 2024, the Government announced changes to BPR and APR to be introduced from 6 April 2026. This included the introduction of a new allowance to which 100% relief will apply, with any remaining qualifying property benefitting from a lower 50% relief. On 23 December 2025 the Government announced its intention to increase the allowance from £1 million to £2.5 million per individual. For further information please see our previous insights which can be found here.

What are the recent announcements?

Following a consultation period, HMRC published draft legislation and explanatory notes on 21 July 2025 which confirm that the changes will come in largely as expected with a few amendments, the more notable being: 

• The anti-fragmentation rules amalgamating multiple trusts created by the same settlor on or after 30 October 2024 will be introduced as expected for the purpose of sharing the £1 million allowance. However, proposed changes to the 'related property' provisions which would have seen multiple trusts settled by the same settlor being connected for IHT valuation purposes, will not now be introduced. Assuming the new law does apply from 6 April 2026, structuring ownership of companies with key tax valuation principles in mind will be important.
• It's positive to see that the option to pay IHT in interest-free instalments over ten years will be extended to all property qualifying for BPR or APR, without further conditions attached.
• The £2.5 million allowance will be indexed in line with CPI but will be fixed for an initial period. It has also been confirmed that the £2.5 million allowance will be transferable between spouses as for other IHT allowances which means that qualifying assets up to a combined value of £2.65 million per couple could potentially be passed IHT free.
• While it may only impact a small number of trusts, there is a change to how an exit charge to IHT is calculated where this follows a 10-year anniversary. Any trusts which had a 0% rate of IHT at the last 10-year anniversary should take advice in advance of April to understand the impact of this change.
• It was also confirmed that the Government’s position remains that BPR and APR will not be extended to assets held in pension schemes, as many had called for in light of the broader changes to the IHT status of pensions.

Next steps

HMRC ran a consultation on the draft legislation which has now ended and we are not expecting any further amendments to the draft legislation. 

With just a few months until the proposed changes are due to apply, there is a limited opportunity to review positions and implement any changes. The decisions to be made can be difficult, impacting both business and family life, so delaying matters not only risks challenges with the availability of advisers, but adds unnecessary pressure to business owners to make critical decisions too quickly. 

If you are impacted by these rules but have not yet taken any action to develop a succession strategy to mitigate risk, please do get in touch with our experts. 

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