Budget 2025: Transferable £1m APR/BPR Allowance

The Chancellor’s Autumn Budget has delivered a significant update for landowners, business owners, and private clients planning their estates.

Following last year’s controversial reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR), the government has confirmed that from 6 April 2026, the combined £1 million allowance for 100% relief on qualifying agricultural and business assets will now be transferable between spouses and civil partners.

Background – The APR/BPR cap

Historically, APR and BPR provided unlimited 100% relief from Inheritance Tax (IHT) on qualifying assets, safeguarding family farms and trading businesses. However, the 2024 Budget introduced a cap: from April 2026, the first £1 million of combined APR/BPR assets will attract 100% relief, with any excess qualifying value receiving only 50% relief (resulting in an effective IHT rate of 20%).

This change was widely criticised for increasing complexity and potential tax exposure for larger estates. The 2025 Budget softens the blow by allowing unused APR/BPR allowance to be transferred to a surviving spouse or civil partner, creating a potential combined buffer of £2 million on second death. 

Why this matters

• Estate planning flexibility: Couples can now structure ownership and succession planning with greater confidence, knowing that relief can be maximised across both estates.
• Mitigating IHT exposure: For farming families and business owners, this measure reduces the urgency to “use up” the allowance on first death.
• Interaction with other allowances: This transferable APR/BPR allowance sits alongside the Nil Rate Band (£325,000) and Residence Nil Rate Band (£175,000), which remain frozen until April 2031.

Key considerations

• Timing: The new rules apply from 6 April 2026.
• Lifetime transfers: The £1m allowance operates cumulatively over seven years for lifetime gifts; any failed transfers will reduce the available relief.
• Trust structures: Relevant property trusts will continue to have their own £1m allowance, refreshing every 10 years.

At Dafferns, we specialise in helping clients navigate complex tax changes. If you would like to discuss how the 2025 Budget impacts your estate or business, please contact our Private Client Tax team.