Following the Chancellor’s Budget announcements today on Agricultural Property Relief and Business Property Relief reform, Idina Glyn, Partner at Mishcon de Reya, said:

 
“The restriction of Agricultural Property Relief (APR) and Business Property Relief (BPR) has been threatened many times, but the Budget today has executed a swift blow to the foundation of our local communities and rural economy. This cap will increase the Inheritance Tax (IHT) payable by a substantial number of business owners and landowners – and not just the ultrawealthy. The incentives for housebuilding and pressure to deliver new homes means land values often exceed the agricultural value and even small farms can be worth well over £1 million. 

“The key question for many farmers and business owners is whether they will have a viable business to pass on to their successor(s) after settling the new IHT liabilities. This will particularly impact farming businesses, which are reliant on their acreage. 

“All business owners will now need to review their succession plans to ensure their business can endure the increased IHT liability from April 2026. For some, this may mean tightening already tight budgets to set aside sinking funds, or to look at life insurance when previously they did not need to do so. 

“The obvious way to manage these provisions is to start planning earlier and fragment ownership, moving assets out of an individual's estate ahead of a potential IHT charge on their death. Ownership could be spread throughout the family, for instance.  
“It is now more likely that the children of farmers and business owners will need to borrow to new levels or sell if they wish to keep the family farm or business. This could mean we see more consolidation in the market as landowners with other resources take the opportunity to expand. 

“The cap may also limit the ability of business owners to invest in new equipment, technology, or expansion, which could slow down growth and innovation within the sectors. Businesses may be forced to divide or sell because of these changes to IHT. We shouldn't forget the main reason for the original introduction of APR and BPR was to keep these businesses intact for the benefit of our economy. Businesses that can survive the IHT bill because they have sufficient surplus resources are likely to increase the prices of their goods and services to maintain profitability.

"We may also see more imaginative family governance structures being used. Traditionally, family constitutions have been used by international families or families with siblings running estates together. The current changes incentivise fragmentation. Well-advised families might look at spreading assets but with "strings attached", where each family member is bound by a set of rules and must take steps to protect the assets from third parties, such as by entering into pre- or post-nuptial agreements. This could need a different skill set to those of traditional landed estate advisors, both in creating and enforcing the agreements."