The impact of December 2025’s APR and BPR changes on life insurance planning

In December 2025, the UK Government confirmed important revisions to Agricultural Property Relief (APR) and Business Property Relief (BPR) that will fundamentally reshape how advisers and clients approach inheritance tax (IHT) planning for farms, family businesses, and other qualifying assets.

These changes — due to take effect from 6 April 2026 — centre on a substantial increase in the relief allowance and carry significant implications for life insurance structuring in estate planning.

APR and BPR: A brief overview

Before examining the recent changes, it is important to recap what Agricultural Property Relief (APR) and Business Property Relief (BPR) entail:

• Agricultural Property Relief (APR): APR provides relief on agricultural land and property, potentially reducing the value of farming assets for IHT purposes. This can help farmers and landowners pass on their estates without facing excessive tax burdens, as APR can reduce the value of qualifying agricultural assets by up to 100%.
• Business Property Relief (BPR): BPR offers a similar relief for business owners, enabling them to transfer qualifying business assets without incurring the usual IHT liabilities. BPR can reduce the taxable value of business assets by up to 100%, helping families preserve their businesses across generations.

For life insurance brokers, understanding how these reliefs are integrated into broader estate planning can help structure policies that protect the value of these assets, ensuring clients can pass on their wealth without the need to sell critical business or agricultural property to pay taxes.

What changed in December 2025?

1. APR and BPR allowance increased from £1 million to £2.5 million per individual

Previously, forthcoming reforms — introduced in the 2025 Budget — proposed capping the amount of agricultural or business property eligible for 100% relief from IHT at £1 million per individual. However, after sustained feedback from farming groups, advisers, and MPs, the Government amended this approach in December, raising the cap to £2.5 million per individual.

This means:

• Up to £2.5 million of combined qualifying APR/BPR assets can attract full 100% relief from IHT per person
• Qualifying assets above this £2.5 million allowance will receive 50% relief, implying an effective IHT rate of 20% on the excess.

2. £5 million allowance for couples

Like the nil-rate band, the £2.5 million APR/BPR allowance is now transferable between spouses or civil partners. As a result:

• A couple can now pass on up to £5 million of qualifying agricultural and business assets between them before facing standard IHT charges, on top of other allowances like the nil-rate band and residence nil-rate band.

3. Trust relief allowances also increased

The Government has confirmed that the trust relief allowances for APR and BPR will also be increased from £1 million to £2.5 million to match the personal relief caps, enhancing planning flexibility where trusts are used.

Why these changes matter for estate planning

These amendments represent a major shift from earlier proposals and recalibrate the reliefs to protect more ordinary family farms and businesses from punitive tax exposure.

Importantly for advisers, they reframe how life insurance should be used alongside APR and BPR in holistic estate plans.

Impact on Life Insurance planning

1. Reassessing IHT exposure on APR/BPR assets

Under the old, unlimited APR/BPR regime, qualifying farms and businesses could often pass free of IHT.

Following the 2026 changes, even with the £2.5 million allowance for individually owned estates or £5 million for jointly owned, estates with significant APR/BPR-eligible assets above the threshold could face an effective 20% tax on the excess.

Life insurance can therefore help ensure beneficiaries are not forced to sell trading businesses or agricultural land to raise cash for tax bills.

2. Planning around the cap and excess relief

Because relief beyond the £2.5 million is only at 50%, advisers should work with clients to:

• Quantify potential IHT liabilities, particularly in estates where asset values (land, shares in private companies, etc.) might exceed the allowance
• Structure policies that align with the timing of the relief application — including making sure policies are written in trust to provide tax-efficient payouts when needed.

This may involve reviewing existing life cover arrangements to ensure sums assured reflect both current and projected IHT exposure under the new regime.

3. Spousal planning and insurance positioning

The transferability of the £2.5 million allowance means clients can plan transfers in a way that takes maximum advantage of both partners’ allowances. Life insurance can support this by:

• Providing liquidity on first death, enabling the surviving partner to utilise the full transferability of allowances without selling assets
• Ensuring that, on second death, sufficient funds are available to meet any remaining IHT bill after allowances and reliefs are applied.

Practical implications for brokers and advisers

For life insurance brokers and financial planners, the revised APR/BPR landscape demands a fresh look at long-term strategies for clients with significant business or farming interests:

Reassess client estates:
Check whether clients’ APR and BPR-eligible assets exceed the new £2.5m allowance and how that affects IHT exposure — particularly on a second death where transferability may leave more to protect.

Align insurance to relief caps:
Structure life insurance solutions that are calibrated to the new allowance, ensuring clients have adequate cover for both the allowance and any excess taxed at 20%.

Educate clients on relief mechanics:
Explain how the combined APR/BPR allowance works alongside traditional IHT planning tools (nil-rate and residence nil-rate bands), and why life insurance continues to be a valuable tool despite expanded relief caps.

Conclusion: A strategic reset for IHT planning

The December 2025 changes — raising the APR and BPR allowance from £1 million to £2.5 million per individual — represent a significant policy recalibration in response to industry feedback.

While the reforms still introduce caps on relief, they provide advisers with a clearer framework in which to plan and will also help reduce the IHT burden.

For life insurance professionals, understanding these changes will be critical to advising clients on robust, tax-efficient estate plans that protect family businesses and farms across generations.

Through thoughtful alignment of reliefs and protective insurance, advisers can help high-net-worth clients navigate the revised inheritance tax landscape with confidence and clarity.

Get in touch

At John Lamb Hill Oldridge, our advisers are experts in offering bespoke insurance that supports high-net-worth and ultra-high-net-worth clients in protecting their wealth.

For more information about how we can help you to support your clients, please get in touch. Email [email protected] or call us on 020 7633 2222.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The Financial Conduct Authority does not regulate estate planning, trusts, or tax planning.

Note that financial protection plans typically have no cash in value at any time, and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.