Succession planning for business and agricultural assets: where things stand in 2026

Handing on a family business or a farm is rarely just a financial transaction. It is about protecting something built over years, often generations, while ensuring the people who depend on it are secure and that the tax bill does not force a sale. Recent changes to inheritance tax have made planning more important than it has been for a long time and have made it a much more talked-about topic.

This article examines the position in England and Wales. Inheritance tax itself is a UK-wide tax, so the reliefs described below apply across the UK, but the wills, trusts, probate and partnership matters discussed here are dealt with as they apply in England and Wales.

What changed, and why the headlines were so alarming

For many years, qualifying farms and family businesses could be passed on free of inheritance tax thanks to two reliefs: Agricultural Property Relief (APR) and Business Property Relief (BPR). At 100% relief, the value passing on was effectively unlimited.

That changed at the Autumn Budget 2024, when the government announced a cap. The original proposal, a £1 million combined allowance that could not be shared between spouses, prompted a strong reaction, particularly from the farming community, much of whose wealth is tied up in land that cannot be sold easily. The lobbying worked, at least in part. In late 2025, the government confirmed that the allowance would be transferable between spouses and civil partners, and just before Christmas, raised it from £1 million to £2.5 million.

Those revised rules are now law. They were enacted in the Finance Act 2026 and took effect on 6 April 2026. If you have seen older coverage referring to a £1 million cap, that figure is out of date. The current position is more generous than first feared, but it still marks a real change from the unlimited relief that went before.

The rules as they now stand

In short, each person now has a combined allowance of £2.5 million for assets qualifying for APR and BPR, with 100% relief. Anything above that figure attracts relief at 50%, meaning the excess is taxed at an effective rate of 20%, half the standard 40% inheritance tax rate. You can read the government’s summary in its guidance on the changes, and the House of Commons Library briefing sets out how the measure passed into law.

The allowance is transferable so that any unused portion can pass to a surviving spouse or civil partner. A couple can therefore shelter up to £5 million of qualifying assets at 100% relief, in addition to the usual nil-rate bands. This transfer is available even if the first death occurred before the new rules took effect.

Two further points are easy to miss. Certain shares treated as ‘not listed’, including many AIM shares, now qualify for 50% relief only and do not benefit from the £2.5 million allowance. The £2.5 million figure is fixed until April 2031, after which it is due to rise in line with inflation.

The traps that catch people out

The reliefs come with conditions and timing rules that are worth understanding before making any decisions.

Agricultural Property Relief covers only the agricultural value of land, not any additional “development” or “hope” value attached to it. For land near towns or with building potential, that distinction can be significant. To qualify, the land must generally have been occupied for agricultural purposes by the owner for at least two years or have been owned for at least seven years if someone else farms it. These conditions remain unchanged by the reforms. You can find the basics on APR and BPR on GOV.UK.

The seven-year period appears in three different ways, and it helps to keep them apart. First, a gift made in your lifetime normally falls out of account for inheritance tax if you survive seven years but counts if you do not. Second, the new allowance refreshes on a rolling seven-year basis for lifetime gifts, much like the nil-rate band. Third, there is a catch for gifts already made: a transfer of qualifying property on or after 30 October 2024 will be reassessed under the new rules if the person making it dies on or after 6 April 2026 and within seven years of the gift.

Giving assets away in your lifetime

Passing assets to the next generation early can be sensible, both for tax reasons and to gradually bring younger family members into the business. But it needs care.

Beyond the inheritance tax timing noted above, a lifetime gift can trigger a capital gains tax charge on any increase in the asset’s value, because you are treated as disposing of it. Relief is often available to defer that charge where business or agricultural assets are involved, but it is not automatic. By contrast, assets passing on death are generally rebased for capital gains tax, wiping out the gain to date. The instinct to give everything away early can therefore swap an inheritance tax saving for a capital gains tax problem, and the right balance depends entirely on the family’s circumstances.

There is also the simple matter of control. Once an asset is given away, it is gone, and the timing of any handover should reflect that as much as the tax position.

Getting the structure right

A workable succession plan is about more than reliefs.

Wills should be reviewed as a priority. A will drafted before these changes may now produce a worse outcome than intended. A common arrangement leaves all relevant assets to children and everything else to the surviving spouse. Under the new cap, that can waste part of the allowance or create an unexpected tax charge, so the wording is worth checking now rather than later.

The ownership of the business should be properly documented. For a partnership, an up-to-date partnership agreement makes clear what happens to a partner’s share on death or retirement. For a company, the equivalent is a shareholders’ agreement, often supported by cross-option arrangements so that surviving owners can buy out a deceased owner’s family. It is also sensible to separate the question of who owns the assets from who runs the business day-to-day, so that management can pass to successors at a different pace from ownership.

Trusts can still play a useful role, though the reforms have tightened the way the allowance applies to them. Advice is essential before settling assets.

Finally, plan for both incapacity and death. A lasting power of attorney ensures someone can act if an owner becomes unable to make decisions, which is especially important where a business needs to keep running.

Paying the bill

For asset-rich, cash-poor farms and businesses, the real difficulty is often finding the funds to pay inheritance tax without selling the very asset being passed on. Two measures help. The option to pay inheritance tax in ten equal annual instalments, interest-free, has been extended to all property qualifying for APR and BPR, easing the immediate pressure. Life insurance, often written in trust so the proceeds fall outside the estate, can provide a ready fund to meet the liability.

A few practical steps

Start early. Good succession planning takes time and leaving it late narrows the options. Talk openly as a family, including those who will not be taking over the business, so expectations are clear. Review the plan regularly, because both the law and family circumstances change.

These rules are now settled, but they are also new, and the right approach depends heavily on the make-up and value of your particular estate. Before making any gifts, restructuring ownership, or rewriting your will, get in touch with your solicitor, who can work alongside your accountant to put a plan in place that suits your family and your business.