The UK government has announced a significant adjustment to Inheritance Tax (IHT) reliefs for agricultural and business property assets. With effect from 6 April 2026, the threshold for the 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) will be increased from £1 million to £2.5 million per estate. This change follows months of campaigning from farming and business communities concerned about the impact of previous reform proposals.
What’s Changed?
Under the revised rules:
- The amount of qualifying agricultural and business assets eligible for 100% relief from IHT is increasing from £1 million to £2.5 million per individual.
- As the allowance is transferable between spouses or civil partners, a couple will now be able to pass on up to £5 million in qualifying assets free of inheritance tax, in addition to the usual nil-rate bands and residence nil-rate bands.
- Relief above this threshold still applies at 50%, meaning qualifying assets above £2.5 million receive partial relief.
- Overall, most family farms and small businesses — estimated at around 85% of estates currently claiming APR/BPR — will avoid paying additional inheritance tax as a result of this policy change, according to Treasury and DEFRA (Department for Environment, Food & Rural Affairs) calculations.
Why This Matters – From a private-client perspective, this revision has several important implications:
- Greater Protection for Family Farms and Businesses
The new £2.5 million threshold means many estates that would have been exposed to inheritance tax under the earlier £1 million cap are now exempt. For farming families especially, where land is often the largest single asset of the estate, this change reduces the risk that future tax bills might force sales of land or disrupt generational succession. This adjustment is expected to halve the number of estates affected by the reforms.
- Improved Planning Certainty
Because the higher threshold aligns with the reliefs being made transferable between spouses, private clients can plan with more clarity. As mentioned above, married couples and civil partners can now combine allowances to shelter up to £5 million of qualifying assets, even if they had been widowed prior to the policy. This strengthens estate planning strategies that incorporate APR/BPR alongside nil-rate and residence nil-rate bands.
- Planning Still Required
Even with the relief threshold raised, it is important that estate planning is kept under review. This is to ensure that APR and BPR strategies are optimised within the new £2.5 million limit.it is important to consider how transfers interact with nil-rate bands, residence nil-rate bands, and trust planning.it may be that holding structures (e.g. family partnerships or trusts) are the best option for individuals under the updated regime.
Conclusion
The government’s decision to raise the IHT relief threshold for agricultural and business property to £2.5 million is a significant development. This will be welcome news for many, particularly those with family farms or qualifying business assets. Whilst this announcement brings greater certainty and relief, it also underscores the importance of proactive estate planning under evolving tax rules.