For decades, a farm or family business could usually pass between generations free of inheritance tax. That has changed. If you own farmland or a trading business in Scotland, a new limit now decides how much of it stays protected.
What the reliefs are
Agricultural property relief (APR) reduces inheritance tax on qualifying farmland, farm buildings and farmhouses. Business property relief (BPR) does the same for the assets of a trading business, and for shares in qualifying unquoted companies. For most qualifying assets the relief used to be 100%, with no upper limit.
What changed on 6 April 2026
The first £2.5m of combined qualifying agricultural and business property still gets 100% relief. Above that, relief is 50%. Inheritance tax is charged at 40%, so the effective rate on the part above £2.5m is 20%.
The government first announced a limit of £1m in the Autumn Budget of 2024. In December 2025 it raised the figure to £2.5m before the rules took effect, and the Finance Act 2026 enacted it. Any unused part of the allowance can pass to a surviving spouse or civil partner, so a couple can cover up to £5m between them.
If your qualifying assets are below £2.5m, or £5m for a couple who can use both allowances, this change shouldn't add to your inheritance tax bill. It bites when the qualifying assets are worth more.
A worked example
Take a farmer with no spouse who owns land, buildings and a trading business worth £4m, all of which qualify for relief.
- The first £2.5m gets 100% relief, so none of it is taxed.
- The remaining £1.5m gets 50% relief, leaving £750,000 chargeable.
- At 40%, that is £300,000 of inheritance tax, before nil-rate bands and other allowances.
Under the earlier rules the same estate would have had no inheritance tax to pay on those assets.
A married couple holding the same £4m between them are in a different position. If the first to die leaves everything to the survivor, the unused allowance passes across, and the survivor's estate has £5m of cover. The full £4m is inside that, so no extra tax arises.
Where Scots law comes in
Inheritance tax is the same across the UK. Succession law is not, and on a farm it can matter as much as the tax. In Scotland a spouse and children have legal rights over a share of the moveable estate, whatever the will says. Moveable estate means things like cash, shares, livestock, machinery and vehicles. Land and buildings are heritable and aren't subject to those claims. Our guide on disinheriting a child in Scotland covers legal rights in full.
A farming family's wealth is often split between the two. A will that leaves the farm to the child who works it can still leave other children with a claim on the moveable assets that keep it running. Planning for the tax without planning for those claims leaves the job half done.
What to look at
Start with what qualifies. The reliefs have conditions, including how the asset has been used and how long it has been owned. Land that is let out or held as an investment may not qualify, and this is where claims go wrong.
Then look at who owns what. Ownership between spouses affects how both allowances are used, particularly on the first death. Make sure the will doesn't waste an unused allowance, and that it deals with legal rights.
A life insurance policy written in trust can cover a tax bill without adding to the estate. See our guide to life insurance in trust in Scotland. If the business is a partnership or company, an accountant should look at how that affects relief. And settle early who will take on the farm or business, and what the others will receive. It is easier to agree before it has to be.
How we help
Richard arranges inheritance tax planning with your accountant and our specialist legal partners, so the tax position and the Scots-law succession position are looked at together. Start with our Inheritance Tax page, or call to talk through your own situation. The limit was changed before it even started, which is a good reason to review a plan rather than set it and forget it.