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Inheritance tax relief threshold increased for farmers and business owners

Ilona-Jade Morgan
Ilona-Jade Morgan Friday 9 January 2026

Ilona-Jade Morgan, associate solicitor in our wills, trusts and probate team, looks at the government’s forthcoming changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), and what these inheritance tax reforms mean for farmers and business owners planning for the future.

What is Agricultural Property Relief and Business Property Relief?

Agricultural Property Relief and Business Property Relief are key inheritance tax (IHT) reliefs designed to help farming families and business owners pass on their assets.

These reliefs can reduce or fully offset IHT on qualifying property, ensuring that businesses and farms remain intact for future generations.

What’s changing and why?

From 6 April 2026, the Government will increase the threshold for 100% APR and BPR from £1 million to £2.5 million per estate.

This change comes in response to concerns that the previous proposed £1 million cap was too restrictive and could force families to sell off land or business assets to meet tax liabilities.

Under the new rules:

  • 100% relief applies to the first £2.5 million of qualifying assets.
  • Any value above this threshold will receive 50% relief, reducing the effective tax rate to 20% instead of the standard 40%.
  • The allowance is transferable between spouses or civil partners, meaning couples can potentially pass on up to £5 million tax-free in addition to any standard nil-rate band availability.

This increase provides greater certainty and flexibility for farming and business families, helping them preserve their assets for future generations.

What does this mean for you?

If you own agricultural land or a qualifying business, this change could dramatically reduce your estate’s exposure to inheritance tax.

For example:

  • A farm worth £3 million owned by a single person
  • £2.5 million qualifies for 100% relief
    • Remaining £500,000 qualifies for 50% relief with an effective tax rate of 20%
  • A married couple with £6 million in qualifying business assets
  • Combined £2.5 million allowances cover £5 million
    • Remaining £1 million qualifies for 50% relief with an effective tax rate of 20%

Please note there may be additional Nil Rate Bands that could be applied to further reduce the tax liability, depending on personal circumstances.

What to consider?

This is a welcome development for farming and business families, offering greater certainty and reducing the risk of forced asset sales. Proactive planning now will ensure you make the most of these changes:

  • Review your estate: If you have agricultural or business assets, reassess your IHT position under the new rules.
  • Update Wills and Trusts: Ensure your documents reflect the increased thresholds.
  • Consider timing: The changes apply from April 2026, so planning is crucial.
  • Maximise allowances: Married couples and civil partners should structure ownership to benefit from the combined £5 million relief.

For advice on how these changes may affect your estate and succession planning, contact our wills, trusts and probate team on 01772 258 321.