Inheritance Tax relief threshold to rise to £2.5m for farmers and businesses
#The Government has today announced a significant change to the UK inheritance tax (IHT) regime, following sustained pressure from farming bodies and business groups. The update centres on Agricultural Property Relief (APR) and Business Property Relief (BPR) and represents a notable softening of reforms proposed in the 2024 Budget.
What has changed?
The key announcement is an increase in the value of assets that can qualify for full inheritance tax relief:
• The APR and BPR threshold has increased from £1 million to £2.5 million per estate
• Where relief is transferred between spouses or civil partners, this effectively allows up to £5 million of qualifying assets to pass free of inheritance tax
• Assets above the £2.5 million threshold will still qualify for relief, but at a reduced rate, rather than being fully exempt
This marks substantial shift from earlier proposals, which would have exposed many family farms and privately owned businesses to unexpected inheritance tax liabilities.
When will the changes apply?
The Government confirmed that the revised rules will be legislated through amendments to the Finance Bill in January 2026 and will take effect from 6 April 2026.
This provides business owners and farming families with a limited but important window to review succession and estate planning arrangements before the new framework applies.
Why has the Government made this change?
The announcement follows strong opposition to the original reforms, particularly from the agricultural sector. Many argued that the previous £1 million threshold failed to reflect modern land and business values and risked forcing asset sales simply to fund inheritance tax bills.
Government commentary suggests the revised threshold will halve the number of estates affected by the reforms, while still maintaining the overall integrity of the inheritance tax system.
What does this mean in practice?
For most family-run farms and trading businesses:
• Existing succession plans may now be less exposed to inheritance tax than previously anticipated
• Estates with higher asset values may still face partial inheritance tax liabilities above the new threshold
• The changes do not affect other core inheritance tax rules, including:
o The £325,000 nil-rate band
o The residence nil-rate band
o The standard 40% inheritance tax rate
As ever, the interaction between reliefs, asset values and ownership structures remains complex.
How Moore South can help
While today’s announcement will be welcome news for many, inheritance tax planning remains highly technical. Reliefs such as APR and BPR depend on detailed conditions, and relatively small changes in asset use, ownership or business activities can significantly affect eligibility.
Moore South’s tax team works closely with individuals, families and owner-managed businesses to ensure inheritance tax planning is practical, compliant and aligned with long-term succession objectives. Our support includes:
• Reviewing wills and estate plans in light of the new thresholds
• Advising on eligibility for Agricultural and Business Property Relief
• Structuring asset ownership between spouses and family members efficiently
• Modelling future inheritance tax exposure and identifying planning opportunities
• Working alongside solicitors and other professional advisers to deliver joined-up succession planning
With the new rules expected to take effect from April 2026, now is an ideal time to review your position and ensure your plans remain robust.
If you would like to discuss how these changes may affect you, your family or your business, our tax team would be happy to help.