INHERITANCE TAX: WHAT THE NEW SPOUSAL TRANSFER RULE MEANS FOR AGRICULTURAL & BUSINESS PROPERTY RELIEF
December 2, 2025
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Introduction
One of the more positive headlines to emerge from the 2025 Budget relates to reliefs for agricultural and business property under Agricultural Property Relief (APR) and Business Property Relief (BPR). Though it perhaps should only be framed as a wafer-thin silver lining in a pretty flabby grey cloud. While the Budget confirmed a cap on 100% relief, it also introduces a welcomed concession: any unused allowance up to £1 million can now transfer to a surviving spouse or civil partner. For business owners, farm-owners and families seeking to pass on a business or agricultural estate, this tweak may make a material difference to their affairs.
What’s changing (from 6 April 2026) ?
From the 2026–27 tax year, the following reforms apply:
- There will be a combined £1 million allowance per individual for the first portion of qualifying agricultural and business property that receives 100% IHT relief. Assets above that amount will receive 50% relief.
- Importantly, any unused portion of that individual £1 million allowance can now be transferred to a surviving spouse or civil partner, including in cases where the first death occurred before 6 April 2026.
- In effect, this allows married couples or civil partners to combine allowances, so in favourable circumstances up to £2 million of qualifying assets may benefit from the 100% relief (assuming no part was used on first death).
- The 50% relief still applies for qualifying business property shares that are traded on certain stock exchanges, or otherwise excluded from full relief.
- Other complementary reforms: estates or trusts with qualifying assets will retain the ability to pay IHT in equal annual instalments over 10 years (interest-free) where APR or BPR apply.
Who stands to benefit most?
This change is especially relevant for:
- Farmers and landowners whose estates qualify for APR, especially where one spouse dies leaving substantial qualifying land or agricultural property, but did not exhaust the full £1 million allowance;
- Owners of family businesses or privately held trading companies who rely on BPR to mitigate IHT on succession;
- Married couples or civil partners with business or farm assets who want to maximise relief on death and use the full combined allowance;
- Estates where one partner dies first, as the new rule allows the surviving spouse to “inherit” the unused relief, simplifying planning and potentially easing the transition to the next generation.
The move has been broadly welcomed as a “fairer” and more flexible approach. In particular, it helps to avoid the awkward position under the draft legislation where a couple could effectively lose unused relief simply because the timing of death wasn’t aligned. However, the relief cap and 50% fallback mean that larger farms or businesses which significantly exceed the £1 million threshold may still face a material IHT charge on death, even with combined spousal relief. Additionally, shares in certain listed or partly-quoted companies (e.g., those trading on non-recognised exchanges) may no longer enjoy 100% relief, reducing the benefit for some business-owner estates.
Planning Implications - What You Should Do
If you or your clients hold qualifying business or agricultural assets and hope to pass them on, this new flexibility is worth incorporating into estate planning. Some practical steps to consider:
- Review Wills and estate structures now. Ensure wills are drafted (or updated) in light of the new transferable allowance so that on first death the surviving spouse is positioned to take full advantage.
- Valuation and quantification: carefully assess what part of the £1 million allowance is likely to be used up on first death, especially where there are mixtures of qualifying and non-qualifying assets, or multiple trusts/structures involved.
- Plan for larger estates: if the farm or business substantially exceeds £1 million, consider whether the 50% relief on excess will create a meaningful IHT liability, and whether lifetime gifting or trust structuring remains appropriate.
- Watch for assets falling outside qualifying criteria, e.g., certain listed shares: these may only qualify for 50% relief (or possibly none), so need careful due diligence and possibly alternative succession tactics.
- Coordinate with other IHT allowances such as the nil-rate band, residence nil-rate band (if applicable), spousal exemptions, and lifetime transfers. The combined impact, timing, structure, and sequencing, remains key.
Conclusion
The new ability to transfer any unused £1 million relief allowance for APR/BPR between spouses or civil partners represents a genuinely meaningful improvement to the 2026-onwards IHT regime. For many family businesses, farms and private companies, the change restores some of the flexibility lost under the original reform proposals and makes succession planning less brittle. That said, the introduction of a 50% relief rate above the £1 million threshold, and the stricter treatment of shares in certain companies, means the relief is no longer as generous or automatic as before. For larger estates, or for businesses with quoted shares, there remains a real risk of IHT exposure and careful planning will continue to be essential.
If you’d like to run through whether this change affects your clients (or your own estate), or to revisit your Will or structure in light of the new rules, do get in touch via our contact page below.
Introduction More wealthy UK residents are exploring life overseas ahead of the 2026/27 tax year. Higher UK taxes, political uncertainty and a desire for a different way of living are all pushing people to look at alternatives. Four destinations stand out for high-net-worth UK individuals as at late 2025: 1. United Arab Emirates (Dubai) 2. Portugal 3. Switzerland 4. Malta Each offers a different blend of tax advantages, residency options and lifestyle. United Arab Emirates (Dubai) - Dubai is now the default choice for many UK entrepreneurs and professionals. Tax For individuals, there is currently no personal income tax on salaries, bonuses or most investment income, and no local capital gains or inheritance tax regime for individuals. There is VAT and a developing corporate tax regime, but personal tax remains far lighter than in the UK. The UK–UAE double tax treaty helps reduce the risk of the same income being taxed twice and needs to be considered alongside UK residence rules. Residency Common routes for UK nationals include: Employer- or company-sponsored residence visas Remote-worker visas for those employed or self-employed abroad Long-term “golden” style visas linked to investment, property or professional status Retirement options for over-55s. (All require private health insurance and periodic renewal.) Lifestyle Dubai offers a high standard of living, excellent connectivity and a large, well-established British community. Housing and schooling are expensive and the lifestyle can encourage overspending, but for many the tax position and opportunity outweigh the costs. Best for: Maximising net income and building or scaling a business in a dynamic, international city. Portugal - Portugal appeals to those who want EU residency, a milder climate and a slower pace of life. Tax The old NHR regime has closed to new applicants and been replaced by a newer incentive framework (often referred to as IFICI) aimed at certain professionals and activities. The UK–Portugal tax treaty reduces double taxation, and Portugal does not operate a classic wealth tax, though property-related charges can apply. (It's signed and ratified but not yet fully in force as of early 2026, which may slightly affect immediate tax planning). Residency Post-Brexit, common routes for UK nationals include: D7 visa – for those with sufficient passive income (pensions, investments, rentals). D8 / Digital Nomad visa – for remote workers with qualifying income from abroad. Work and other residence visas tied to employment or specific skills. These can lead to long-term residence and, ultimately, citizenship if physical presence and integration tests are met. Lifestyle Cost of living is generally below the UK (though higher in central Lisbon and the Algarve), English is widely spoken in cities, and the public and private healthcare systems are well regarded. There are large British and wider international communities. Best for: Those wanting EU residence, good quality of life and a balance of tax and lifestyle advantages. Switzerland - Switzerland attracts UK families who prioritise security, discretion and top-tier services. Tax Tax is set at federal, cantonal and communal level, so overall rates vary widely by canton. Well-chosen cantons can be very competitive for both individuals and companies. Private capital gains are not generally taxed, but there is an annual wealth tax on net assets, with rules depending on location. For suitable non-working individuals, some cantons still offer lump-sum (forfait) taxation, where tax is based on living costs rather than worldwide income, subject to minimum levels and conditions. Residency As non-EU nationals, UK citizens use: B permits – time-limited residence, often linked to work L permits – short-term residence for specific assignments C permits – longer-term settlement after sustained residence and integration Wealthy retirees and non-working individuals may be able to obtain residence based on financial self-sufficiency and, in some cantons, lump-sum taxation. Lifestyle High costs are offset by excellent infrastructure, schools and healthcare (with compulsory private health insurance). International communities are strong in Zurich, Geneva and other cities, though social life can feel more formal than Southern Europe. Best for: Those seeking stability, discretion and first-class public services and education, rather than the lowest day-to-day costs. Malta - Malta is a compact EU state with a very familiar feel for UK nationals: English is an official language and the legal and business environment is comfortable for British professionals. Tax Malta’s tax system and UK–Malta treaty can be particularly attractive where you hold significant foreign-source income. Under the Global Residence Programme, qualifying individuals can pay a favourable flat rate on foreign income remitted to Malta, while foreign capital gains kept offshore are generally not taxed in Malta. There is no separate wealth tax and no classic inheritance tax, though duties may apply to certain Maltese assets. The separate “golden passport” (citizenship by investment) route has been struck down by the EU’s top court, but residence programmes remain available. Residency Options for UK citizens include: Employer-sponsored Single Permits combining work and residence The Global Residence Programme for financially self-sufficient individuals meeting property and minimum tax thresholds Digital-nomad-style visas for remote workers Long-term residence after several years of compliant stay Lifestyle Costs (especially rent and property) are typically lower than in the UK outside the most fashionable areas. English is widely used in government and business, healthcare is solid, and London is only a short flight away. Best for: Those wanting an English-speaking EU base with favourable treatment of foreign-source income and a tight-knit expat community. How to decide & next steps - All four countries can work extremely well for UK high-net-worth individuals, but for different profiles: Choose Dubai if your priority is low personal tax on active income and you are comfortable with a high-energy city. Choose Portugal if EU residency, climate and lifestyle matter as much as tax. Choose Switzerland if stability, education and healthcare are at the top of your list. Choose Malta if you want an English-speaking EU base with flexible options for foreign income. The right answer depends on your overall wealth, income mix, family plans and how tied you remain to the UK. If you would like bespoke, confidential advice on whether remaining UK-resident or relocating to Dubai, Portugal, Switzerland or Malta is the better strategy for your situation, you are welcome to get in touch to explore your options in detail.
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