The £2.5m cap has landed: what it means for probate valuations

The £2.5m cap has landed: what the APR and BPR changes mean for probate valuations

For decades, qualifying farms and family businesses could pass to the next generation entirely free of inheritance tax. That position changed on 6 April 2026, when reforms to agricultural property relief (APR) and business property relief (BPR) introduced a cap on the amount of relief available at the full rate. Anyone dealing with a farming estate, a family business, or a probate valuation now needs to understand how the new rules work, and what they mean in practice.

What has changed for agricultural property relief and business property relief?

Before the reform, agricultural property relief and business property relief could each reduce the value of qualifying assets by 100%, with no ceiling on the amount claimed. From 6 April 2026, that changed. Every individual now has a £2.5 million allowance for 100% relief, covering the combined value of qualifying agricultural and business property together.

Any value above that £2.5 million allowance still qualifies for relief, but only at 50%. In practice, this means an effective inheritance tax rate of 20% on the excess, rather than the previous rate of nil. The allowance refreshes every seven years, in line with the nil-rate band, and applies to lifetime gifts as well as to assets held at death.

Perhaps the most significant change came late in the process. The government originally proposed a £1 million allowance with no transferability between spouses. Following sustained pressure from farming and business groups, ministers first agreed the allowance would transfer between spouses and civil partners, then increased it to £2.5 million. 

Full details of the reform are set out on GOV.UK. A married couple or civil partners can now, between them, potentially pass on up to £5 million of qualifying assets before the 50% rate applies, provided the right will structures are in place.

Why does this matter for farmers' inheritance tax position?

Farming businesses are frequently asset rich but cash poor. A working farm might combine land, buildings, machinery, and livestock worth several million pounds, while generating relatively modest annual profit. Under the old rules, that combination could pass to the next generation without any inheritance tax exposure at all, regardless of value.

But this is no longer guaranteed. Many larger farms and estates will place above the £2.5 million allowance once land, farmhouse, and business assets are combined, exposing the excess to a 20% charge. For farmers' inheritance tax planning, the practical consequence is that families can no longer assume agricultural property relief will absorb the whole value of the farm. What the farm is actually worth, and how it is structured, has become far more important.

Some reassurance is available. Inheritance tax on qualifying agricultural and business assets can still be paid in instalments over ten years, interest free, which eases the pressure on cash flow. That being said, an instalment plan still requires a business to generate a viable surplus, which is not guaranteed on every working farm.

What counts towards the £2.5 million allowance?

The allowance covers the combined value of assets that qualify for 100% agricultural property relief and 100% business property relief. It does not include assets that only ever qualified for 50% relief, such as shares in companies not listed on a recognised stock exchange.

Getting this distinction right requires a careful, asset-by-asset assessment of what is actually held, starting with accurate land valuations for any farmland or development land in the estate.

How does business relief for inheritance tax work under the new rules?

Business relief for inheritance tax operates on the same principle as agricultural property relief, and the two now share a single combined allowance. A business owner with qualifying trading assets worth £2.5 million or less will still see the full value pass free of inheritance tax. Anything above that threshold is taxed at an effective rate of 20%, rather than being fully exempt as before.

For many owner-managed businesses, this changes the calculation behind succession planning. A business that was previously worth transferring in its entirety without any tax planning may now generate a real liability on death.

Business owners should revisit their wills and shareholder agreements, starting with a clear picture of what the business premises and assets are worth. Our team regularly supports business owners with commercial property valuations for exactly this purpose.

What does this mean for probate valuations?

This is where the reform has the most direct impact on the day-to-day process of dealing with an estate. Under the old rules, many farms and businesses qualified for total relief, so the precise value of individual assets rarely mattered for inheritance tax purposes. Whether the farmhouse was valued at £800,000 or £950,000 made no practical difference if the whole estate was going to be exempt regardless.

That is no longer the case. Where an estate sits close to, or above, the £2.5 million allowance, the value placed on every qualifying asset directly affects the tax bill.

A valuation that is too high can inflate the tax due on the excess. A valuation that is too low can attract a challenge from HM Revenue and Customs, delaying probate and creating uncertainty for the family. Understanding the difference between probate value and market value is now a central part of getting this right.

Why accurate valuation evidence matters more than ever

Executors have always had a duty to provide HMRC with a reasonable and defensible valuation of the assets in an estate. What has changed is the financial consequence of getting it wrong. With relief now capped, the difference between an optimistic valuation and a robust one can genuinely move the amount of tax payable, not just the paperwork involved.

A professional valuation, prepared by a RICS-registered surveyor, carries far more weight in this environment than an informal estimate or an out-of-date figure. It gives executors a defensible position if HMRC queries the figures, and it protects beneficiaries from either overpaying tax or facing a later dispute. 

This is particularly relevant for farmland, agricultural buildings, and business premises, where values can vary considerably depending on location, condition, and development potential.

What happens if HMRC challenges a probate valuation?

HMRC has always had the power to query a probate valuation, but the £2.5 million cap gives it more reason to do so on estates that sit close to the threshold. If a valuation is challenged, the District Valuer will typically request supporting evidence, comparable transactions, and a clear rationale for the figure submitted.

Executors who have already commissioned a professional valuation, prepared on a proper basis and supported by market evidence, are in a far stronger position to resolve any query quickly.

Where a dispute does escalate, expert witness support can help present that valuation evidence in the right way. Without this preparation, a dispute can take months to settle, holding up the distribution of the estate and creating unwelcome uncertainty for beneficiaries.

What should executors and family businesses do now?

The changes to agricultural property relief and business property relief make early, accurate valuation advice more important than at any point in the last two decades. Executors, farmers, and business owners should consider the following steps:

• Commission a professional valuation of all qualifying agricultural and business assets, rather than relying on an estimate or an old figure.
• Review wills and trust arrangements to check how the £2.5 million allowance is used, particularly for married couples and civil partners.
• Establish which assets qualify for the full allowance and which only ever attracted 50% relief, such as unlisted shares.
• Consider whether inheritance tax can be paid by instalment, and whether the business or estate can support that repayment schedule.
• Take specialist tax and legal advice before making lifetime gifts, since the seven-year rule and the allowance interact in ways that are easy to overlook. Where cash is needed quickly to settle a tax bill, selling a probate property at auction can generate funds within weeks rather than months.

Speak to BTG Eddisons about probate valuations

Our valuations team provides RICS-compliant probate valuations for farms, family businesses, and commercial property across the UK, giving executors the robust evidence they need to support an inheritance tax return with confidence.

We have more than 180 years of experience in the property sector, a proven track record of success, and consistently positive reviews from clients we have supported through probate and succession planning. Every valuation is prepared by a qualified surveyor with genuine local market knowledge, not a generic desktop assessment.

Whether you are administering an estate, planning succession for a family farm or business, or simply want to understand how the £2.5 million allowance affects your position, our team can help. Call 0330 191 8107, email [email protected], or complete the contact form below to arrange a consultation.