From 6 April 2026, Inheritance Tax (IHT) has become a more pressing issue for many farming families. Agricultural Property Relief (APR) and Business Property Relief (BPR) are still available at 100%, but they are no longer unlimited.
What has actually changed?
Each individual now has a £2.5 million allowance of assets that can qualify for 100% APR and/or BPR. This is best thought of as a cap on the value of assets that can be relieved, not a reduction in the relief rate.
In simple terms:
Importantly, APR and BPR share the same £2.5 million cap. It is not £2.5 million for APR plus £2.5 million for BPR. It is one combined allowance.
One cap per person and planning on the first death still matters
The £2.5 million allowance applies per individual, not per farm. For married couples and civil partners, unused allowance from the first death can normally be transferred to the surviving spouse or civil partner.
A common approach is for everything to pass outright to the surviving spouse on the first death. In many cases this means the deceased’s APR/BPR allowance is largely unused and transferred, potentially allowing up to £5 million of qualifying assets to be sheltered at 100% on the second death.
However, some families may prefer to retain greater flexibility by using a discretionary or flexible will trust on the first death. This can:
In practice, a discretionary trust is often used as a temporary holding stage, rather than as a final long-term structure. Executors will usually have up to two years from the date of death to review the position and, where appropriate, redirect assets out of the trust once ownership positions are confirmed, valuations have been agreed and the inheritance tax exposure is better understood.
This allows decisions to be made with full information, rather than under immediate pressure following death.
With land values continuing to rise, reviewing first-death planning is now more important than it has been for many years.
Paying inheritance tax by instalments
Where inheritance tax is attributable to certain illiquid assets, the law allows the tax to be paid in up to 10 equal annual instalments, rather than as a single lump sum.
This regime is broader than just farms. It can apply to tax attributable to:
This distinction is important and instalment eligibility is driven by the nature and liquidity of the asset, not simply whether APR applies.
For asset-rich but cash-poor estates, this flexibility can be critical, allowing tax to be met over time without forced or premature asset sales.
Interest: a key point often misunderstood
The instalment option is not always interest-free.
Understanding which part of the tax bill attracts interest, and why, is an important part of planning and cashflow forecasting for executors and families.
How the instalment option works
Each instalment is typically one-tenth of the tax attributable to the instalment-eligible assets. However, sale of the underlying asset will usually accelerate payment of the remaining tax.
The deadline that really matters
There is one major catch executors must understand.
If the first instalment is not paid by the due date, the instalment option can be lost entirely. If that happens:
Delays caused by probate, valuations, or ongoing discussions with HMRC do not protect the estate. In practice, the aim should usually be to pay the first instalment on time, even where figures are provisional and subject to later adjustment.
Why this matters more after 2026
With APR and BPR now capped, more farming estates will face at least some inheritance tax exposure, often linked to core working land. For many families, the instalment option will be the difference between controlled long-term planning and rushed decisions made under financial pressure.
What executors should do in the first six months
Executors should act early to:
How we can help
Effective use of the instalment regime often begins during lifetime, not after death. Reviewing ownership structures, relief exposure, first-death planning and long-term cashflow in advance is key to ensuring families can actually comply with the instalment rules when the time comes.
We work with farming families both before and after death to:
Our aim is to protect farm cashflow, avoid unnecessary land sales, and help families navigate a complex and emotional period with clarity and confidence.
APR and BPR remain essential reliefs, but they are no longer unlimited. Where inheritance tax arises, the instalment option can make it manageable, provided the estate is prepared and the first deadline is not missed.
To discuss this in further detail, please get in touch with one of our Farms and Estates experts here.
