What's new on this page? Jump down to 'Spousal transfer of APR/BPR allowance' for an explanation on what the small change announced in the Autumn Budget 2025 means.
What is APR and how does it work?
Inheritance Tax reliefs like APR (Agricultural Property Relief) reduce the amount of tax farmers and landowners have to pay when farmland is passed to the next generation after a death.
This helps farms stay within the family to allow them to continue to look after the countryside and produce food for the country.
What has the government announced?
In its October 2024 Budget, the government announced it will change the rules for Inheritance Tax, including APR and BPR (Business Property Relief) on farmland and business assets.
This means an effective tax rate of 20% on agricultural assets valued over £1 million – although there are other reliefs available that can also be used.
What will be the impact of this change?
The new tax rules could force farmers to sell their family farms to pay the Inheritance Tax bill. This could happen even if they have worked on the farm for many years.
Spousal transfer of APR/BPR allowance
During the November 2025 Budget, the Chancellor announced a small change to the rules which will allow those farmers who are married, or have deceased spouses, to transfer their inheritance tax allowance to one another if one of them dies having not used their allowance.
Currently, the first £325,000 of assets in any individual’s estate are exempt from inheritance tax; this is known as “the nil rate band”. This is available to everyone – whether they are a farmer or not.
If you leave assets to your spouse or civil partner, they are usually exempt from inheritance tax. Because you are transferring ‘across’ to your spouse, rather than ‘down’ to your children, you haven’t used your nil-rate band, so the band is transferred to the surviving partner. For example, if the husband dies first, the wife will have two nil rate bands when she dies – hers and her husband’s.
Originally, the family farm tax didn’t allow the £1 million APR/BPR allowance to transfer between spouses. So, if the wife died first and left everything to her husband, he would still only have one £1 million allowance to pass on to his children.
The Chancellor has now changed this. The £1 million allowance can be transferred between spouses. This means a farmer doesn’t have to leave £1 million of agricultural assets to their children when they die. They can leave it to their spouse, and the spouse can use both allowances – £1 million from their partner and £1 million of their own – when passing assets to their children. This is a minor change, but will offer some relief to married farmers who die unexpectedly with young children.
If the first death is before 6 April 2026, it will be assumed the entirety of the allowance will be available for transfer to the surviving spouse or civil partner. This will make the rules fairer for widows and widowers, and reduce complexity.
What will the proposed change mean for farming?
APR has encouraged investment in farming. It means people who buy farmland must make sure it is farmed, and so rent it out to young farmers, giving them a chance to start their own businesses.
The new tax rules will discourage people from buying farmland and renting it out to farmers. This could lead to less land being available for farming and more being used for other purposes.
