Inheritance Tax Planning for Norfolk Farmers: What the APR & BPR Changes Really Mean for You

From 6 April 2026, the 100% rate of Agricultural Property Relief and Business Property Relief will be capped at the first £2.5 million of combined qualifying assets – not the £1 million originally announced. Above that, relief drops to 50%, which works out as an effective 20% inheritance tax rate on the excess. For a lot of Norfolk farms, that’s still a meaningful bill. But it’s a very different conversation to the one we were all bracing for eighteen months ago.

Tax Planning for Norfolk Farmers

We’ve been advising farming families across Norfolk and Suffolk for over 50 years now, through generations of the same families and more rule changes than we can count.

We’ll be honest with you: recent years have brought more upheaval than any of us have seen before. Farming is a hard, unpredictable business at the best of times – long hours, thin margins, weather and markets that don’t care about your plans. Financial planning for a farm has to work the same way farming itself does: thought through well in advance, and flexible enough to bend when conditions change, because they will.

Smith & Pinching also never forget that a farm isn’t just a business on a balance sheet. It’s a way of life, and for a lot of people, it’s what sustains life more broadly – yours, your family’s, and further afield than that. The risk, the hours, and the stress that go into keeping a farm going are real, and they deserve to be planned around properly, not treated as an afterthought once the accounts are done. That’s the thinking behind how we work with farming families: building plans meant to run across generations, not just to the next Budget, with enough flexibility built in to adapt when change gets forced on you — as it has, twice, with this one.

A quick recap, because the goalposts moved twice

If you’ve been putting off dealing with this because the rules kept changing, we don’t blame you. Here’s where things actually stand.

Securing Generational Wealth for Norfolk Farms

At the Autumn Budget in October 2024, the government announced that Agricultural Property Relief and Business Property Relief – which had previously given 100% inheritance tax relief on qualifying farmland and business assets with no upper limit – would be capped at £1 million per person from April 2026. Anything above that would only get 50% relief. Farming bodies pushed back hard, and on 23 December 2025 the government revised the cap upward to £2.5 million.

A few other details matter as much as the headline number:

• The allowance is now transferable between spouses and civil partners. Unused allowance on first death can pass to the survivor, so a married couple can shelter up to £5 million of combined agricultural and business property.
• Gifts in the seven years before death may count against the allowance, so earlier gifts can fall outside this over time – relevant if you’re doing lifetime gifting alongside the allowance.
• It’s due to be index-linked to CPI from April 2031 – though that’s how the legislation currently reads, not a certainty. The nil-rate band was meant to rise with inflation too and has been frozen repeatedly for over 15 years, so we’d treat £2.5 million as a real-terms figure for planning purposes rather than assume it’ll grow.
• AIM shares and other unlisted business assets now receive 50% relief, regardless of the £2.5 million threshold—that’s a separate change, and it isn’t going away.
• IHT on qualifying APR/BPR property can be paid in 10 equal annual installments, interest-free — this installment option is being extended to cover all APR/BPR-qualifying property, not just the family home, which matters a lot if the bulk of an estate’s value is tied up in land rather than cash.

So does this actually affect your farm?

Probably, if you’re a working farm rather than a smallholding – and this is where being in East Anglia cuts both ways. Arable land here is some of the most productive and most valuable in the country, which is good for your balance sheet and less good for your inheritance tax position. Industry data from Strutt & Parker’s English Estates & Farmland Market Review Winter 2025/26 put average English arable land values at around £11,000 an acre in 2025, with pasture nearer £8,600 – and prime East Anglian arable land routinely trades above that average. Add in machinery, farm buildings, any diversified business activity, and a modest-sized working farm gets to £2.5 million quicker than people expect.

The maths that matters isn’t your land value in isolation – it’s land plus buildings plus machinery plus any qualifying business assets, combined, set against the allowance. And if the farm is owned jointly by a couple, you’re potentially working with a £5 million combined figure rather than £2.5 million, which changes the picture for a lot of the families we speak to.

What counts, and what doesn’t

Not every farm asset gets treated the same way, and this is where we see the most confusion:

1. Working farmland and farmhouses occupied for agricultural purposes generally qualify for APR.
2. Let land may qualify depending on the tenancy arrangement and how long it’s been let – this is a common trip point.
3. Farm cottages, diversified business use (holiday lets, solar, storage) can fall under BPR rather than APR, or sometimes neither, depending on the specifics.
4. AIM-listed shares held as part of a wider estate now only get 50% relief. They sit outside the £2.5 million allowance entirely – they don’t draw on it, and it isn’t available to top them up either.

Getting this categorisation right, ideally with your accountant and solicitor alongside your adviser, is the difference between an accurate plan and an unpleasant surprise. Smith & Pinching can help with your wealth management from the day we are engaged as your financial advisors.

A typical farming asset example

Say a Norfolk arable farm – buildings, machinery and land included – is valued at £4 million, owned by a married couple with no earlier lifetime gifts. Using the transferable £5 million combined allowance, the whole estate could, in principle, sit within the 100% relief band. Compare that to a similar farm worth £6 million: £5 million would get full relief, and the remaining £1 million would attract IHT at the effective 20% rate – a £200,000 liability. On top of this, the couple’s standard nil-rate bands (£325,000 each, so £650,000 combined) also apply, which is why some published examples show the effective tax-free figure for a married couple as high as £5.65 million rather than £5 million. This is a simplified illustration to show how the numbers interact, not a calculation for any specific estate – actual outcomes depend on ownership structure, prior gifts, tenancy status, whether any residence nil-rate band applies, and other reliefs, which is exactly the kind of thing worth checking properly rather than assuming.

What’s worth considering now

We’d rather people start this conversation eighteen months too early than three months too late, because succession planning on a working farm isn’t something you do quickly.
• Get a proper up-to-date valuation of land, buildings, machinery and any diversified income streams – you can’t plan against a number you’re guessing at.
• Review how the farm is owned – sole name, joint names, partnership, or through a company – since this affects how the allowance applies and whether it’s transferable.
• Think about lifetime gifting, bearing in mind the seven-year rule and the fact that the £2.5 million allowance itself refreshes every seven years, which opens up some legitimate planning routes for multi-generational transfers. If you gifted qualifying assets between 30 October 2024 and 5 April 2026, it’s worth double-checking how the transitional rules apply – gifts made in that window aren’t automatically outside the new regime if the donor dies within seven years of the gift.
• Remember the 10-year interest-free installment option if a liability does arise – this can ease the cash-flow pressure of an IHT bill on assets like land and machinery that aren’t easily or quickly sold.
• Consider whether life insurance to cover a potential IHT liability makes sense – this is often more straightforward than restructuring ownership, though as with any product built around investment or protection planning, it’s worth remembering that the value of investments can go down as well as up, and it isn’t guaranteed, so you may get back less than invested where an investment element is involved.
• Talk to your accountant, solicitor, and financial adviser together, not in sequence – APR and BPR planning touches tax, legal ownership, and succession all at once, and the best outcomes usually come from those three working from the same picture.

None of this is a substitute for a personal review. What’s right for one farming family depends heavily on how the business is structured, what other assets are involved, and what the succession plan actually looks like. An adviser can assess whether any of the above suits your circumstances.

Frequently asked questions

Is the APR/BPR cap really £2.5 million now, not £1 million?

Yes. The government announced this revision on 23 December 2025, after the original £1 million cap (announced at the October 2024 Budget) drew significant criticism from the farming sector. From 6 April 2026, the 100% relief rate applies to the first £2.5 million of combined agricultural and business property, with 50% relief above that.

Can a married couple really shelter £5 million?

In principle, yes, if the full allowance is unused on first death and transfers to the surviving spouse or civil partner. This isn’t automatic in every situation, so it’s worth checking how it applies to your specific estate and ownership structure.

Does let farmland still qualify for Agricultural Property Relief?

It can, but the rules depend on the type of tenancy and how long the letting arrangement has run. This is a common area where farms lose relief they thought they had, so it’s worth reviewing formally rather than assuming.

What happens to AIM shares held in a farming estate?

From April 2026, AIM shares and similar unlisted business assets move from 100% to 50% Business Property Relief, and that’s the only relief they get – 50%, full stop. Importantly, AIM shares sit entirely outside the £2.5 million allowance: they don’t use any of it up, so the full £2.5 million remains available for your other agricultural and business assets.

Should I start gifting land now to get ahead of the changes?

Lifetime gifting can be part of a sensible plan, but it carries its own rules – the seven-year survival period, potential loss of control over the asset, and interaction with other reliefs. Gifts made between 30 October 2024 and 5 April 2026 fall under transitional rules and aren’t automatically exempt from the new regime if the donor dies within seven years, so this isn’t something to do without proper advice.

Can I pay the inheritance tax bill in installments if my estate can’t easily raise the cash?

Yes. The option to pay IHT on APR/BPR-qualifying property in 10 equal, interest-free annual installments is being extended to cover all such property, which is particularly useful where the value is tied up in land or machinery rather than cash. The first installment is typically due six months after the end of the month of death.