In late 2025 the government confirmed a significant change of direction on inheritance tax reliefs for farmers and family owned businesses. Following sustained criticism of earlier proposals, ministers announced an increase in the threshold at which full inheritance tax relief applies to qualifying agricultural and business assets. The move has been widely described as an about face, reflecting the strength of opposition from the farming and rural business community.
What has changed
From 6 April 2026, the threshold for full Agricultural Property Relief and Business Property Relief will rise from £1 million to £2.5 million per estate. Where spouses or civil partners jointly hold assets, this effectively allows up to £5 million of qualifying property to be passed on free of inheritance tax.
Relief will still be available above this level, but at a reduced rate. The revised structure is intended to protect the majority of working farms and trading businesses, while limiting unlimited relief for the largest estates.
Why the government reversed its position
The original proposals, announced as part of earlier Budget measures, triggered strong reactions across the agricultural sector. Many farmers argued that a £1 million cap bore little resemblance to modern land and business values, particularly in areas where farmland prices have risen sharply over the past decade.
There was widespread concern that families could be forced to sell land or business assets simply to fund inheritance tax liabilities, undermining long term succession planning and the viability of family farms. Protests, lobbying by representative bodies, and sustained media attention kept the issue firmly in the public eye.
In responding to these concerns, the government acknowledged that it had listened to feedback and accepted that the earlier threshold risked unintended consequences for ordinary family enterprises.
Government rationale
Ministers have framed the revised threshold as a balanced solution. The stated aim is to protect productive farms and genuine trading businesses, while still ensuring that inheritance tax applies more effectively to large estates.
The government has also emphasised the economic and social importance of family farms and small to medium sized businesses, particularly in rural communities. By raising the threshold, it expects to significantly reduce the number of estates affected by the reforms compared with the original proposals.
Reaction from the sector
Farming organisations and business groups have broadly welcomed the announcement, describing it as a sensible and pragmatic adjustment. For many families, the increased threshold removes immediate pressure and provides greater certainty when planning for succession.
That said, some commentators have noted that the revised rules do not eliminate inheritance tax exposure altogether. Larger estates and asset rich businesses will still need to consider how reduced relief above the threshold may affect long term planning.
Planning implications
For farmers and business owners, the change offers welcome breathing space, but it does not remove the need for careful inheritance tax planning. Asset values, ownership structures, partnership arrangements, and the interaction with other reliefs remain critical factors.
Early planning remains essential, particularly for estates approaching or exceeding the new thresholds. Professional advice can help families understand how the revised rules apply to their circumstances and avoid unexpected liabilities.
Conclusion
The increase in inheritance tax relief thresholds represents a clear shift in government policy. It highlights how sustained sector engagement can influence tax decisions, and it provides greater reassurance for family farms and businesses heading into the 2026 tax year. However, with reliefs still capped and reduced above certain levels, inheritance tax planning remains firmly on the agenda.