The UK Government has today (Tuesday, December 23) announced that the level of the Agricultural and Business Property Reliefs threshold will be increased from £1 million to £2.5 million when it is introduced in April 2026.
This allows spouses or civil partners to pass on up to £5 million in qualifying agricultural or business assets between them before paying inheritance tax, on top of existing allowances.
Following the reforms to Agricultural and Business Property Reliefs announced at Budget 2024, the government has now stated that it has listened to concerns of the farming community and businesses about the reforms.
Having carefully considered this feedback, the government outlined that it is going further to protect more farms and businesses, while maintaining the core principle that the most valuable agricultural and business assets should not receive unlimited relief.
The change will be introduced to the Finance Bill in January and will apply from April 6, 2025.
Raising the threshold will reduce the number of farms and business owners facing higher inheritance tax bills under the reforms, ensuring that only the largest estates are affected, according to the government.
Today’s announcement will halve the number of estates claiming Agricultural Property Relief (including those also claiming Business Property Relief) who are affected by the reforms – better targeting the relief, it added.
As a result:
- The number of estates claiming agricultural property relief (including those also claiming business property relief) affected by the reforms in 2026-2027 halves from 375 to 185;
- Most estates should benefit, with inheritance tax cut by hundreds of thousands of pounds for many families;
- The number of estates affected by the reforms claiming only business property relief – excluding those holding only AIM shares – will fall by a third, reducing complexity and ensuring support goes where it’s needed most;
- Around 85% of estates claiming agricultural property relief in 2026-2027, including those that also claim for business property relief, are forecast to pay no more inheritance tax on their estates.
Environment Secretary Emma Reynolds said: “Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming.
“We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms.
“It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities.”
To deliver this, the government will introduce an amendment to the Finance Bill 2025 to:
- Increase the threshold at which 100% Agricultural Property Relief and Business Property Relief applies from £1 million to £2.5 million per estate, with 50% relief continuing to apply to qualifying assets above that level;
- Given the allowance will be transferable between spouses, a surviving spouse or civil partner will be able to pass on up to £5 million of qualifying agricultural and business assets tax-free, on top of existing nil‑rate bands. This will apply to people who are widowed and have lost spouses or civil partners before the policy was introduced.
The government has stated that it remains committed to making the tax system fairer by reducing the generous inheritance tax reliefs available to owners of large agricultural and business estates, while continuing to recognise the importance of farms and businesses to local communities and the wider economy.
The revised approach continues to ensure that qualifying agricultural and business assets are taxed at a much lower effective rate than most other assets, it added.
“The changes we are implementing reflects the concerns that have been raised while preserving the majority of the revenue from reform to help cut debt and borrowing and fund public services,” Reynolds continued.
“The costings for today’s announcement will be incorporated into the next OBR [Office for Budget Responsibility] forecast.”
Today’s announcement follows the government’s commitment to establish a new Farming and Food Partnership Board to bring together senior leaders from farming, food production, retail, finance and government to take a practical, partnership-led approach from farm to fork to strengthen our food production.
It builds on updates to the planning rules, via the National Planning Policy Framework, to cut unnecessary red tape and help farmers expand their businesses with easier approvals on farm reservoirs, greenhouses, polytunnels and farm shops, boosting food production and rural growth.
Reaction to Inheritance Tax Relief changes
Following a long-fought campaign by the NFU, its president, Tom Bradshaw said: “We have spent the past 14 months campaigning and lobbying to try and mitigate the worst of the impacts of the proposals.
“After it became clear that this policy wasn’t going anywhere, we have focused our campaign to mitigate the worst of its impacts for the majority.
“Today’s announcement, which sees the tax threshold raised from £1 million to £2.5 million, will come as a huge relief to many. While there is still tax to pay, this will greatly reduce that tax burden for many family farms, those working people of the countryside.
“I am immensely proud of all those farmers and growers who have worked with the NFU and supported our campaign.”
The government’s proposals to change the rules for APR and BPR are due to come into force in April 2026 and would have seen an effective tax rate of 20% on agricultural assets valued over £1 million.
Today’s announcement sees that threshold raised to £2.5 million. This is on top of the change to the spousal transfer allowance, announced by the Chancellor at the most recent Autumn Budget.
President of the Country Land and Business Association, Gavin Lane said: “This change will come as an enormous relief to thousands of family farms across the country who faced seeing their businesses taxed out of existence.
“The government deserves credit for recognising the flaws in the original policy and changing course.
“However, this announcement only limits the damage – it doesn’t eradicate it entirely. Many family businesses will own enough expensive machinery and land to be valued above the threshold, yet still operate on such narrow profit margins that this tax burden remains unaffordable.
“On that basis, we thank ministers for the constructive dialogue, we look forward to working in partnership to grow the rural economy, whilst continuing to call for these reforms to be scrapped entirely.”
