Today, the Chancellor introduced significant alterations to Agricultural Property Relief (APR) and Business Property Relief (BPR), which will greatly affect farmers and landowners.
Effective from April 2026, APR and BPR—presently applicable at a full 100% rate on all qualifying agricultural and business assets without any cap on the reported value, will change to offer a maximum 100% relief solely on the first one million pounds of qualifying assets within an estate.
For assets exceeding this limit, the relief will decrease to 50%, leading to an effective tax rate of 20%.
This adjustment aims to safeguard the small family farms, by allowing full relief on the initial £1 million of assets and targeting the larger estates and farm businesses. However, with average land values in the UK around £8,700 per acre, estates with over 115 acres of bare land could incur an Inheritance Tax burden of 20% (£1,740 per acre). Here in the westcountry we are seeing land values around the £10,000 per acre, reducing the size of the holding which will fall within the parameters of the new rules, and incurring an Inheritance Tax burden of £2,000 per acre. The threshold for equipped farms or those with development potential may be considerably lower.
As a result of these changes, it is anticipated that there will be a rush to gift or transfer assets into trusts before the April 2026 deadline. The importance of seeking professional tax and valuation advice before making hasty decisions cannot be overstated. Our skilled team of agricultural valuers is ready to assist with any valuation needs.
The rate of Capital Gains has also changed, although the residential rate remains. The lower rate increasing from 10% to 18% and the higher rate from 20% to 24% for disposals made on or after today (30th October).
Meanwhile some new legislation will broaden the definition of APR to include land that is managed under environmental agreements with or on behalf of the UK government, devolved administrations, public bodies, local authorities, or other approved responsible organisations. Good news to those who have diversified into carbon markets, Biodiversity Net Gain and environmental schemes.
To summarise, the budget has reinforced expectations that changes to Inheritance and Capital Gains Tax were on the horizon, both with considerable effects on the farming community. These adjustments will increase tax liabilities for many farm businesses. Capital Gains Tax changes take effect immediately, while Inheritance Tax changes will start in April 2026, offering some time to revisit existing asset transfer plans.
Now, more than ever, it’s essential to consider future planning with guidance from experienced advisors in the sector. This planning could involve asset transfers within the farm business or the disposal of assets within specific thresholds. Landowners are encouraged to seek financial advice to help minimise potential impacts and avoid creating new tax liabilities where none currently exist.