DRAFT FINANCE BILL
The draft Finance Bill has now been published; it contains the changes for the reduction in the relief which is available through Agricultural Property Relief (APR) and Business Property Relief (BPR) and is proposed to take effect from April 2026.
The Bill has no real significant changes, despite the hard work and relentless lobbying from various industry groups. The main headlines of this are:
- 50% rate of relief for APR and BPR set as a default
- Complex drafting for the £1 million of full relief for APR and BPR combined, including the assessment of lifetime gifts in the preceding 7 years Potentially Exempt Transfers (PETs)
- Extensive and complex provisions for Trusts
- The option of paying by 10 annual instalments, interest free.
WHAT IS NEW?
One important development in the draft Finance Bill 2025–26 is the introduction of statutory indexation for the new £1 million cap on 100% Inheritance Tax (IHT) relief under APR & BPR.
Initially announced in the October 2024 Budget, the cap was to be fixed at £1 million per individual, with no mechanism for adjustment. However, following stakeholder feedback and continued lobbying from industry groups, the government has now proposed that the cap be annually updated in line with inflation, using the Consumer Prices Index (CPI) from 6 April 2030 onwards.
This means that from the 2030/31 tax year, the £1 million threshold will be adjusted each year based on the CPI rate from the previous calendar year and rounded to the nearest £10,000. This change introduces a degree of futureproofing and helps to preserve its “real term value” as land and business asset prices rise over time.
While this is a welcome step for longer-term planning, it’s important to note that the cap will remain fixed at £1 million from its implementation in April 2026 until indexation begins in 2030.
DELAYED IMPLEMENTATION
A key recommendation from the Environment, Food and Rural Affairs (EFRA) Committee is that the proposed changes to Agricultural and Business Property Relief be delayed by 12 months, shifting implementation from April 2026 to April 2027.
The Committee argues that such a delay is essential to allow time for proper consultation with industry stakeholders, more robust impact assessments, and to give farming families and rural businesses sufficient time to plan for the changes.
Concerns raised by MPs include the speed at which the reforms were announced, limited engagement with the agricultural sector, and the risk of unintended harm to viable family farms. A deferral would, they say, help ensure that the eventual policy is better informed, more practical in its application, and less likely to undermine food security or cause financial distress to farming households.
If you would like to discuss matters in relation to these changes, please contact us on 01829423183.