23 Dec 2025
Inheritance tax relief: APR and BPR allowance increased from £1m to £2.5m
On 23 December, the government surprisingly announced an increase in the proposed new 100% allowance for agricultural property relief (APR) and business property relief (BPR), due to be introduced from 6 April 2026.
Today, it has been announced that the allowance will be introduced at £2.5m rather than the previously proposed £1m. Because the allowance is transferable, this means an allowance of £5m for a married couple or civil partners and for those already widowed. The details are available here.
What’s next?
The changes to APR and BPR are yet to go through Parliament. The inheritance tax changes have been selected for the Committee of the Whole House which is due to start its deliberations on 12 January 2026. The timing of this announcement could indicate concern about whether enough Labour MPs will support this measure.
Background and lobbying
The APR and BPR policy changes have been driven by various academics and other tax lobbyists. In particular, CenTax have been heavily involved, whose August paper explained the motivation for the original policy announcement in October 2024 on page 62 as follows:
“The Government has stated that ‘The purpose of the reforms is to raise revenue to ensure the sustainability of the public finances and to fund public services, whilst continuing to support farms and businesses by targeting the reliefs to make them fairer.’ When questioned about these objectives, the Prime Minister has emphasised that the ‘driving purpose’ was to raise revenue.”
The sources for these statements are given in the document.
The October 2024 policy announcement stated that the changes to APR and BPR would raise around £0.5bn a year. Not a huge amount in terms of the government’s finances but not chicken feed either.
There was intense lobbying following the October 2024 Budget but the government stood firm. We had hoped for significant changes in the November 2025 Budget as there was an opportunity for the impact of the change to be softened at that point. The government did concede that the allowance should be transferable, which is a more significant change than it might first sound. Widows and widowers are entitled to a brought forward transferred allowance when the new rules come into effect in April. This November 2025 concession reduces the amount the measure will raise in the short term by about £70m a year. About one seventh of the total Agricultural property relief and business property relief changes – GOV.UK.
A further significant change
As tax advisers, we thought that was it. We’d been through the initial policy announcement, intense lobbying, the publication of the detailed draft legislation in July, followed by further lobbying. Yet by 26 November, the only change was making allowance transferable. At that point, it felt like we had as much certainty as possible ahead of the new rules.
However, we’ve now had this further very significant concession. It suggests the government, confident it could pass the measure, may now be reconsidering. Is this the final change, or could further concessions follow?
Final thoughts
Today’s announcement states at the end in the final note to editors that
“As is normal practice, the Exchequer cost of these changes will be considered by the Office for Budget Responsibility (OBR) and published at the Spring Forecast.”
None of this seems normal practice. We have no costing to go on but a £2.5m fully transferable allowance likely means this measure won’t raise raise significant revenue. So why make the change? Will there be further climbdowns and concessions as we have seen elsewhere?
It will be interesting to see what the new year brings. As ever, the importance of good advice remains. Don’t over-react but don’t stick your head in the sand either.
Succession planning still matters
The recent increase in inheritance tax relief is welcome news, but it doesn’t remove the need for careful succession planning.
