10 ways the new APR/BPR rules affect estate administration

Introduction

For some time now we have been anticipating and preparing for the reforms to inheritance tax (IHT) for agricultural and business property. Following the Finance Act 2026 and now that we are past 6 April 2026, we are into the new regime.

That means that relief on property qualifying for Agricultural Property Relief (APR) and Business Property Relief (BPR) is restricted for the first time since 1992. Under the new regime, a new £2.5 million allowance applies to the combined value of property in an estate qualifying for 100% APR or 100% BPR (Relieved Property). Relief at the reduced rate of 50% applies to the value of any Relieved Property exceeding the £2.5 million threshold. In practical terms, this means that the value of Relieved Property above the allowance is subject to an effective IHT rate of 20%.

Where someone dies owning Relieved Property exceeding their allowance (which would also be reduced by any gifts of Relieved Property in the 7 years prior to death), this could lead to complex estate administration which has yet to be tested. The Government has estimated that up to 1,100 estates across the UK will pay more IHT in the tax year 2026–27 as a result of the reforms.

This article explores 10 ways in which estate administration will become more complex and the increased burdens this will place on the estate and personal representatives (PRs).

1. Increased IHT Exposure

Perhaps the most obvious impact of the new regime. Where the deceased owned Relieved Property above £2.5 million (or above £5 million for a surviving spouse or civil partner who has received a transferred allowance), the estate will face an IHT charge at an effective rate of 20% on the excess. For many, this will be a considerable increase as against their IHT exposure under the old regime. Take, for example, an estate with shares in a £10 million business. The IHT in the event of death on 1 April 2026 would have been £0 on those shares. On death now, assuming a full £2.5 million allowance but no nil rate band, the IHT will be £1.5 million.

2. Additional Estate Administration

All estates holding Relieved Property are impacted. Whilst there may not be additional tax to pay where the deceased's Relieved Property falls within their allowance, the complexity of the new rules will still mean more complex estate administration. PRs will need to familiarise themselves with the new rules, obtain accurate market valuations, and complete additional calculations to demonstrate entitlement to relief. This will increase time and costs involved in estate administration even for more modest estates.

3. Requirement for Valuations

Under the previous regime, whilst PRs were required to report the value of Relieved Property in IHT accounts, in practice the absence of any IHT liability on such assets meant that formal valuations were not always required. Now, with HMRC able to claim IHT on value over and above the allowance, valuations will be critical. Valuing agricultural and business property is inherently complex and as a result costs can be high. There is also a real risk of valuation disputes. These factors could result in delays in estate administration and additional costs for the estate, including the potential exposure of estates to late payment interest.

4. Liquidity Issues

This will likely be a challenge in all cases. For businesses and farms, wealth is often wrapped up in the business or land and the deceased may not have had significant liquid assets, proportionate to the liability, to fund the IHT payable. Even where a business has cash, extracting it can come with significant tax charges (e.g. income tax or capital gains tax depending on the method of extraction) and these tax bills are in addition to the IHT charge in question, making it a tax-inefficient approach. Life insurance will likely play a significant role in funding IHT liabilities, and this should be considered well in advance. Borrowing may also play a role, again coming with additional administrative burden and cost. The first payment to HMRC will be due within six months after the end of the month of death and therefore PRs need to have access to funds quickly.

5. Timings for Paying IHT

The Government has extended the option to pay IHT on Relieved Property by equal annual instalments over ten years, interest-free. This is a welcome concession and should provide meaningful assistance to estates holding illiquid qualifying assets. However, it will mean that estate administration (and executor responsibilities) continue for ten years, and liquidity still needs to be achieved over that time frame.

6. Treatment of AIM Shares

The deceased may also have held assets qualifying only for 50% relief under the new regime, e.g. AIM shares. These do not count against the £2.5 million allowance and will need to be dealt with and accounted for separately in the IHT return.

7. The Transferable Allowance

The allowance is transferable between spouses and civil partners, so a married couple can, between them, pass on £5 million in qualifying Relieved Property, or up to £6.3 million when their full nil rate bands and 50% relief are taken into account. This needs to be carefully considered on both the first and second death. If the death of the first spouse was before 6 April 2026, it will be assumed that they have a full £2.5 million allowance available for transfer. If the deceased of the estate in question is the first to die, consideration will need to be given to whether the allowance is banked or passed to the surviving spouse. This will come down to individual circumstances. However, in many cases it will be more prudent to bank the relief on the first death to protect against future loss of relief.

8. Wills Creating Trusts

Where a will creates a trust, as is regularly the case with high-value estates, it will be essential to calculate what allowance is available for the trust. This will be relevant when calculating the IHT payable on relevant property regime charges within the trust going forward.

9. Inappropriate Will Structures

It has been good planning for many years now to "bank" Relieved Property by passing it to a non-exempt beneficiary, e.g. a child or a trust, rather than to a spouse so that the relief is not "wasted". If a will has not been updated to properly consider the interaction of its provisions with the new regime, it may be that the child or trust receives all Relieved Property, whether it qualifies for 100% or 50% relief. There will then be a question of who is liable for the IHT: the recipient or the estate. The answer to that question will depend on how the will is drafted. However, it may not reflect the testator's intentions and it may not be tax efficient. As a result, there could be an increase in post-death variations for Relieved Property, but these additional administrative and costly hurdles should be avoided by reviewing will structures now.

10. Impact of the Transitional Rules

Transitional rules were introduced between 30 October 2024 (when the changes were announced in that year's Autumn Budget) and 6 April 2026. As a result, many individuals owning Relieved Property made gifts, whether outright or into trust. If a donor dies now, within seven years of the gift, the transfers will need to be reassessed under the new regime both in assessing any IHT payable on the failed gifts and when calculating any allowance available on death.

Conclusion

The new APR and BPR regime is now a reality, and the ten issues explored above demonstrate that its impact on estate administration will be felt across the board. PRs will face greater demands in terms of valuations, compliance, and funding. For those advising clients, the message is clear: wills and succession planning should be reviewed now, liquidity planning should be addressed proactively, and early engagement with specialist valuers and tax advisers on death will be essential to navigate the complexities of the new rules effectively.