What This Guide Covers
- What changed to Agricultural and Business Property Relief from 6 April 2026
- Why the new £2.5m cap can create an inheritance tax bill where there wasn't one before
- Why the inherited property in an estate often ends up funding that bill
- The six-month payment deadline executors need to know about
- What to do if this applies to the estate you're administering
Most of the attention this year has gone to the inheritance tax changes affecting pensions and to the sharp rise in the probate application fee. But a quieter change took effect on 6 April 2026 that is catching out a growing number of executors: for the first time, Agricultural Property Relief (APR) and Business Property Relief (BPR) — reliefs that have historically sheltered farms and family businesses from inheritance tax almost entirely — are now capped.
If the estate you are administering includes a farm, a family business, a share in a business, or AIM-listed shares, alongside the property you are trying to sell, this change may mean there is now a tax bill where previously there wasn't one — and it may be the property sale that has to fund it.
What Actually Changed
Before 6 April 2026, qualifying agricultural and business assets could pass to beneficiaries with 100% relief from inheritance tax, regardless of value. From 6 April 2026, that unlimited 100% relief is capped at a combined £2.5 million per person across both APR and BPR together. Above that threshold, relief drops to 50%, which produces an effective tax rate of 20% on the value above £2.5 million — half the standard 40% rate, but a real bill where there was none before.
The £2.5 million allowance is also transferable between spouses and civil partners in the same way the nil-rate band is, meaning a married couple's estate can in principle shelter up to £5 million of qualifying agricultural or business assets before this tapered charge applies. AIM-listed shares, which previously qualified for 100% BPR in their own right, moved to 50% relief from the same date, with no separate allowance — they now sit inside the same £2.5 million cap.
By HMRC's own estimate, around 85% of estates claiming APR and BPR in 2026–27 are expected to pay no additional tax as a result of the increase from the originally proposed £1 million threshold to £2.5 million. That leaves a minority — but a real one — facing a bill for the first time, often on assets that are far from liquid.
Why This Often Lands on the Property
This is where it becomes relevant to anyone selling an inherited home. A farm or a family business is rarely sitting on £500,000 of spare cash. When the estate does owe tax under the new cap, that liability is due to HMRC within six months of the end of the month of death — well before many estates have sold anything, and often before a Grant of Probate has even been issued for larger or more complex estates.
Executors in this position typically have three options: use the Direct Payment Scheme to pay from the deceased's own bank or building society accounts before probate is granted, take out an executor's loan against the estate to cover the bill upfront, or — often the most straightforward route — sell an asset in the estate quickly enough to meet the deadline. Where the estate includes a residential property alongside the business or farm, that property is frequently the most saleable, least contested asset available, which is exactly why it often becomes the one that gets sold first to fund a tax bill that has nothing to do with the house itself.
The Six-Month Deadline Doesn't Wait for a Buyer
This is the detail that catches families out. Inheritance tax on the estate is due six months after the end of the month in which the person died — for a death in February, for example, that means payment by 31 August. If the tax isn't paid by then, HMRC begins charging daily interest on the outstanding amount, on top of the tax itself, for as long as it remains unpaid.
A standard open-market sale, from instructing an agent to legal completion, routinely takes three to six months even in a healthy market — and that is before accounting for the well-documented rise in fall-throughs and delayed completions across the current market. For an executor already up against a six-month tax deadline, a conventional sale can easily overrun it, adding interest to a bill the estate is already trying to settle.
What Executors in This Position Should Actually Do
If you are administering an estate that includes agricultural or business assets over £2.5 million, alongside a property, the first step is always the same: get a formal valuation of the qualifying agricultural and business assets, so you know whether the cap actually applies to this estate before assuming the worst. Many estates will still fall comfortably within the transferable £5 million allowance for a married couple.
Where a genuine liability does exist and the property needs to be turned into cash quickly to meet the six-month deadline, it is worth knowing your options before committing to a sale process that may not complete in time. A direct sale to a specialist cash buyer can typically complete in seven to twenty-eight days, with no chain and no risk of the transaction collapsing — which, for an executor racing an interest-accruing tax deadline, is often the deciding factor over the last few thousand pounds a slower open-market sale might otherwise achieve.
We would always recommend speaking to the estate's solicitor or a specialist probate tax adviser before deciding how to fund an inheritance tax bill — this article explains the framework, not personal advice for your specific estate.
Frequently Asked Questions
Does the £2.5m relief cap apply to every estate?
No. It only applies where the estate includes agricultural or business assets that previously qualified for 100% Agricultural Property Relief or Business Property Relief. Estates without farmland, a family business, or AIM shares are unaffected.
Is the £2.5m allowance shared between APR and BPR?
Yes. It is a single combined £2.5 million allowance covering both reliefs together, not £2.5 million for each relief separately.
Can a married couple get more than £2.5m?
Yes. Like the nil-rate band, the allowance is transferable between spouses and civil partners, meaning up to £5 million combined can be sheltered.
What happens if the estate cannot pay the inheritance tax within six months?
HMRC begins charging daily interest on the unpaid amount. Executors can use the Direct Payment Scheme, an executor's loan, or a quick property sale to help meet the deadline.