Family farms and rural businesses received a practical change in Budget 2025: the government will allow a surviving spouse or civil partner to use any unused portion of the new £1 million Agricultural Property Relief (APR) and Business Property Relief (BPR) allowance. The measure applies from 6 April 2026 and mirrors how the nil‑rate band and residence nil‑rate band already transfer between spouses. GOV.UK also confirms it can help widows and widowers where the first death occurred many years before that date.

That transferability means a survivor could, depending on circumstances, access up to £2 million of qualifying agricultural and business assets at 100% relief. It removes the need for artificial ownership splits purely to use allowances and gives farm families a cleaner line of sight on succession planning.

Set against the wider reform announced at Autumn Budget 2024, the framework from 6 April 2026 is clear. The first £1 million of combined APR/BPR qualifies for 100% relief. Above that threshold, qualifying assets attract 50% relief, meaning the effective inheritance tax rate on that slice is up to 20% rather than 40%. HMRC will allow the tax on those qualifying assets to be paid in equal instalments over 10 years interest free.

These reliefs sit alongside standard inheritance tax thresholds. Each person has a £325,000 nil‑rate band. When a main residence is left to a direct descendant, there may be an additional residence nil‑rate band of up to £175,000, although this is tapered for estates worth over £2 million. Full exemption for transfers between spouses or civil partners continues.

A survivor example shows the change in practice. If the first spouse died leaving everything to the survivor, the deceased’s unused £1 million APR/BPR allowance can now transfer. On the survivor’s death after 6 April 2026, up to £2 million of combined agricultural and business assets could be relieved at 100%, plus up to £650,000 of nil‑rate band, taking the potential tax‑free total to about £2.65 million. Residence nil‑rate band may apply, but many estates at this level will be affected by the £2 million taper.

For joint owners leaving the farm to a child or grandchild, the arithmetic is straightforward. Two people can combine their £325,000 nil‑rate bands and £175,000 residence nil‑rate bands with their £1 million APR/BPR allowances each. That gives a potential tax‑free transfer of around £3 million when residence conditions are met. If the beneficiary is not a direct descendant, the residence element drops away and the figure falls to roughly £2.65 million.

A single owner leaving the farm to a direct descendant can still shelter around £1.5 million tax free: £1 million of APR/BPR plus the £325,000 nil‑rate band and up to £175,000 of residence nil‑rate band, subject to taper. Without a direct descendant, the maximum typically falls to about £1.325 million.

The fiscal impact is expected to sit with the largest estates. Government analysis indicates that up to 375 of the wealthiest estates claiming APR, including those also using BPR, will pay more inheritance tax in 2026–27 compared with the position before the Autumn Budget 2024 reforms. Because the £1 million allowance is now transferable, 190 estates should be better off relative to the 2024 policy: 60 would no longer pay any extra and 130 would pay less additional tax. Almost three‑quarters of estates claiming APR are not expected to pay more, based on the latest official data.

The rationale set out by ministers is distributional. Figures published at Autumn Budget 2024 show the largest 117 APR claims-around the top 7%-accounted for 40% of the total value of relief, costing £219 million. The top 37 claims-about 2%-accounted for 22% of relief, costing £119 million. The government argues that concentrating full relief on the first £1 million protects small family farms while asking the very largest estates to contribute more.

For farm businesses and rural SMEs, the practical checklist is familiar. Keep clear records of ownership, valuations and trading activity so assets meet APR/BPR tests. Update wills to reflect the new transferability and avoid contorted ownership purely for tax reasons. Consider whether the residence nil‑rate band can be secured and whether estate value risks triggering the £2 million taper. Match nil‑rate bands to assets that do not qualify for APR/BPR, reserving the 50% relief for qualifying property above £1 million.

Cash flow deserves attention even where a future bill looks modest. Where 50% relief applies, the remaining tax on qualifying farm and business assets can be spread over a decade interest free, which can help keep working capital in the business through succession. The traditional inheritance tax rules continue to apply: transfers to a spouse remain fully exempt and gifts to individuals fall outside inheritance tax if made more than seven years before death, with taper relief available after three years.

Defra points to wider support alongside the tax changes, citing £11.8 billion committed to sustainable farming and food production this Parliament. Funding for Environmental Land Management schemes rises from £800 million in 2023–24 to £2 billion a year by 2028–29. For most family farms, the message is to plan around the £1 million 100% relief, use the new spousal transfer where available, and model the 50% band early so there are no surprises after 6 April 2026.