The Labour Government’s Autumn 2024 Budget introduced sweeping changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), placing a cap on 100% relief at £1 million per individual. This heavily topical reform, set to take effect in April 2026, is reshaping how farming families will need to plan for inheritance and succession.
Understanding how to effectively utilise these reliefs, particularly through tools like a Deed of Variation, can help secure your family's financial future.
The New Landscape of APR and BPR
Under the new rules, the first £1 million of qualifying agricultural or business property receives 100% relief from Inheritance Tax (IHT). Any value exceeding this threshold is only eligible for 50% relief, significantly increasing the potential IHT liability on farming estates. Notably, the £1 million allowance is not transferable between spouses – while you would hope they see reason and change, it's hard to find any sense within the new Labour Government!
The Importance of a Deed of Variation Pre-April 2026
Prior to April 2026, the current rules allow full 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) on qualifying agricultural and business assets, with no cap in place. This provides an invaluable opportunity for farming families to fully utilise these reliefs and minimise Inheritance Tax (IHT) liabilities.
By using a Deed of Variation, families who have lost a loved one within the last two years (or sadly do so prior to April 2026) can ensure that these generous reliefs are not wasted by redirecting assets to the next generation (if the Will did not already do so), thereby avoiding the unnecessary accumulation of wealth in the surviving spouse’s estate and reducing future IHT exposure.
Key Points About Deeds of Variation:
Time-Sensitive Action: Must be executed within two years of the date of death.
Retrospective Adjustment: Retrospectively alters the distribution as if the deceased made the changes.
Formal Requirements: Must include a valid 'Statement of Intent' and be properly executed.
Tax Considerations: If there is no tax impact, HMRC does not need to be informed, the deed should however be retained as evidence, as to should any documentation confirming the eligibility of APR/ BPR.
Asset Registration: Updating land registry records may be necessary to reflect the redirected assets.
APR/BPR Will Trusts: A Solution for Future Planning Post-April 2026
Consider a farming couple who jointly own a farm valued at £2 million, with each spouse owning £1 million. Under traditional planning, the first spouse’s share would typically pass to the survivor, utilising the spousal exemption and deferring any IHT liability until the second death.
Under the new rules:
The deceased spouse’s £1 million APR/BPR allowance is wasted because it is not utilised.
On the survivor’s passing, only their £1 million allowance applies at 100% relief.
The remaining £1 million qualifies for just 50% relief, resulting in an IHT liability of £200,000.
The new APR/BPR cap therefore revives interest in the use of Will Trusts, similar to the historic Nil-Rate Band (NRB) Trusts commonly used before the introduction of the transferable NRB.
By establishing an APR/BPR Will Trust, families can:
Direct the first spouse’s share of qualifying assets to the trust upon their death.
Preserve the full £1 million allowance for the deceased spouse’s share, ensuring maximum IHT relief.
Protect assets for the next generation while allowing the surviving spouse to benefit during their lifetime.
The Importance of Proactive Will Drafting
With the upcoming restrictions, will drafting is once again a crucial component of effective estate planning. Farming families should:
Review existing wills to ensure they align with the new rules.
Consider incorporating APR/BPR Will Trusts to maximise relief allowances.
Plan for the orderly succession of agricultural and business assets to the next generation without leaving the surviving spouse’s estate overexposed to IHT.
Act Now to Secure Your Family’s Future
If your family has experienced the loss of a loved one within the last two years, now is the time to act. A Deed of Variation could save hundreds of thousands of pounds in IHT by ensuring no relief is wasted. Additionally, forward-looking strategies such as APR/BPR Will Trusts can protect your family’s farming legacy for generations to come.
At Mitchells, we specialise in helping farming families navigate the complexities of estate and succession planning. Whether it’s reviewing your current position, drafting a Deed of Variation, or updating your will, we’re here to help.
Contact Us Today…
For an off-the-record chat about how these changes might impact you, contact Mitchells today. Do not wait until it’s too late to secure your family’s future.
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