The APR/BPR shake-up: what it means for family-owned businesses

What’s APR and BPR?

From 6 April 2026, the application of Agricultural Property Relief (APR) and Business Property Relief (BPR) will change significantly. These reliefs reduce the value of agricultural property and business property for the purposes of calculating inheritance tax. Currently the reliefs are applied at either 100% or 50% and there’s no limit on the amount of the relief that can be claimed. The changes limit the value of the reliefs and impose caps on the amount that can be claimed.

This article is targeted at students who want to be commercially aware, but it's also applicable to those preparing for interviews or writing applications. The changes to APR and BPR in the UK are worth understanding, especially if you're looking at private client, tax or family business law.

The APR and BPR have helped families to pass on agricultural assets and business assets by significantly reducing or eliminating inheritance tax (IHT) for years. Without these reliefs, many families will pay the 40% IHT on the value of the qualifying assets that fall into the estate of a person when they die. Agricultural property is land or pasture that’s used to grow crops or to rear animals. Business property includes shares in a trading company or business equipment.

These reliefs have underpinned long-term investment, retention of family ownership and succession planning. However, the government has introduced changes that confront decades of planning assumptions and pose new risks to family business continuity.

Below is a breakdown of the key changes.

£1 million ‘cap’ on full relief; 50% relief thereafter

The relief of 100% will be limited to the first £1 million of qualifying property in an individual’s estate. Any assets over this amount will only get 50% relief, rather than the full 100%.

Applying theory to a real-life situation, let us consider the following example.

The Jones Family Farm is a third-generation family-run mixed farm. It includes land, farm buildings, machinery and a small food business. The total estate is worth £3 million. Until now, the application of APR and BPR meant that the estate would’ve been passed down to the next generation without paying IHT.

As a result of the changes:

• only £1 million qualifies for 100% relief;
• the remaining £2 million gets 50% relief, so £1 million is taxable; and
• at 40%, that’s a £400,000 IHT bill.

No transferability between spouses

The £1 million allowance will not be transferable between spouses. That is, each spouse (or civil partner) must use their own allowance independently. But the allowance does refresh every seven years (see below).

Contrary to other parts of succession planning, the non-transferable nature of the allowance adds a degree of planning complexity: one spouse with a business or land heavy estate may use their full allowance, but the other spouse can’t borrow or share their unused allowance.

Trusts and periodic/exit charges

The reforms will also affect how qualifying property is settled into a trust: these new changes mean that only the first £1 million in assets settled into a trust will have no IHT entry charge, while any excess would be subject to IHT.

For example, if the Jones family put their farm into a trust, only the first £1 million would benefit from no entry charge into the trust, while the balance would be subject to IHT charges.

AIM shares and unlisted shares

Another significant change is that shares listed on Alternative Investment Market (AIM) will no longer qualify for 100% BPR; they’ll now be restricted to 50% relief, even if the value is within the £1 million cap.

This is a major departure from previous practice and affects many growth businesses that have used AIM or similar structures.

Proposals and inflation

The £1 million allowance is proposed to refresh every seven years (the same as how the IHT nil rate band refreshes)

From 6 April 2030, the £1 million cap will be linked to inflation, so it’ll increase with the Consumer Price Index (CPI) to avoid it being eroded by inflation.

Why does this matter?

Let's go back to the example of the Jones family. You may have heard the phrase, ‘land rich, cash poor.’ Besides receiving a £400,000 IHT bill on their estate, these new rules create a huge cash problem for families whose wealth is tied up in land or the business.

In extreme cases, to pay this new tax bill, the Jones' could be forced to exit (sell) the business during the owner’s lifetime. Some families would rather this than leave the burden to their children or other family members. This may result in ownership changes, job losses or business disruption, which is something most families want to avoid.

The Jones' may look to a change of ownership or securing investment to provide funds, but the land or business assets would no longer be family-owned. Some could feel compelled to reduce their ambition or scale down their operation in order to stay under the £1 million threshold. Or borrow heavily, which could put them under financial pressure. They’d need to pay this loan back with interest and also continue to sustain cashflow.

As a trainee or apprentice, to showcase commercial awareness, consider the strategic, operational and financial impacts these new rules could have.

What could families like the Jones' do to mitigate this large IHT bill?

Many families like the Jones' are considering reorganising the ownership of their assets, such as splitting ownership of the farm or business between spouses so that less of the asset is taxed. Or using lifetime gifting methods. This is because when you gift assets such as shares (eg, business

property) or land (eg, agricultural property) these are no longer part of the estate and therefore not subject to IHT.

As there’s a narrow window for making these changes, tax planning lawyers will be inundated with these tasks before April next year.

Why has the government made these changes?

The rationale behind it is to target tax relief more fairly and prevent wealthy individuals from claiming millions of pounds in IHT relief. But critics argue that it penalises families who’ve built long-term businesses, discourages succession planning, and creates uncertainty for thousands of family businesses and farms across the UK.

Groups like Family Business UK and the National Farmers Union (NFU) have warned that the changes could result in:

• job losses (up to 200,000 jobs);
• reduced investment; and
• fragmentation of businesses.

While the Treasury expects to raise about £500 million per year, there could be serious economic consequences.

From a law student’s perspective: what should you know?

If you’re applying to law firms or for roles that specialise in private client, tax, commercial, or agricultural or property law, prospective employers will want to see that you know how to consider the effects of the law and policy on people and businesses.

Commercial awareness takeaways

Estate planning will become more urgent and complex

Lawyers are already advising clients to:

• gift assets now, before the rules change;
• restructure ownership (eg, splitting assets between spouses or children);
• use trusts to mitigate IHT; and/or
• consider selling or reorganising their business to adapt to the changes.

More litigation or disputes?

With tighter rules and uncertainty around how assets qualify, disputes between beneficiaries (those entitled to assets upon death) and trustees may increase. That could mean more work in trusts and estates litigation or contentious probate.

How are lawyers responding?

Advisers are taking two approaches:

1. Proactive planning

Lawyers are helping clients act before April 2026, implementing solutions such as:

• lifetime gifting of qualifying assets;
• family trust planning;
• rebalancing asset ownership; and
• setting up insurance to cover expected IHT.

But these steps come with risks, including capital gains tax, anti-avoidance rules, and possible loss of control.

Some lawyers are advising clients to:

• wait until final legislation is published; and

2. Caution

• avoid irreversible decisions until the rules are clearer.

Because parts of the reforms are still under consultation, we could see changes before the April 2026 deadline.

Recap

What’s happening?

APR and BPR reliefs are being limited. Only the first £1 million of assets will get 100% relief from IHT.

When?

Changes start from 6 April 2026 (with some from 2025).

Who’s affected?

Mainly family farms and businesses with valuable land or business assets.

From an aspiring solicitor's perspective, recognise that this is urgent estate planning and tax law

will become more complex for family businesses. Clients may be seeking urgent advice in the run-

up to April 2026. It’s of the utmost importance to act decisively, but not recklessly, choosing strategies that preserve flexibility for families and guard against anti-avoidance risk.

Final thoughts

In interviews or applications, show that you understand how these changes could affect businesses.

For example, many will now:

• rethink their growth and investment plans;
• speed up succession decisions; and
• rely more heavily on legal and tax advice.

Fortunate Akinwunmi is a solicitor apprentice at Michelmores LLP.