Announcements in the Autumn Budget 2024 changed Inheritance Tax (IHT) rules for farmers and family businesses.
However, in December 2025 the government changed its mind, following criticism and protests.
Agricultural and Business Property Reliefs for IHT
The threshold for Agricultural and Business Property Reliefs (APR and BPR) has gone up to £2.5million from April 2026. This is a significant shift from the £1million proposed in the 2024 budget. Spouses or civil partners can therefore pass on up to £5million in qualifying agricultural or business assets to family members.
Changes to the Finance Bill
To implement the change, the government will amend last year’s Finance Bill. This will increase the threshold at which 100% APR and BPR applies. It will go up from £1million to £2.5million per estate, with 50% relief continuing to apply to assets above that level.
The allowance is transferable between spouses, so a surviving spouse or civil partner can pass on up to £5million in addition to existing nil rate allowances. This will apply to people who lost spouses or civil partners before introduction of the policy.
Impact of the new IHT rules
Raising the threshold will significantly reduce the number of farms and family business owners facing higher IHT bills. However, larger estates must still follow the new rules with relief falling to 50% for assets above the threshold.
The government estimates the changes will halve the number of estates claiming agricultural property relief or business property relief. The figures will go down from 375 to 185. This could mean IHT bills for many families reduce by hundreds of thousands of pounds.
Businesses holding only Alternative Investment Market (AIM) shares won’t benefit from these business property asset relief changes. However, around eight out of 10 estates claiming agricultural property relief in 2026/27, including business property relief, probably won’t pay more IHT.
Why did the government backtrack on the IHT changes?
The original £1million threshold meant smaller farms and family-run businesses could not meet the unexpected IHT bill.
Raising the threshold will allow many farmers and business owners to plan, allowing new generations to take over. However, they may decide it’s time to rethink their position. Many families have built up their farms and businesses over generations and could still face large IHT liabilities. It may be the final burden that causes them to close their operations. In the longer term this could lead to less tax revenue, job losses, and reduced economic growth.
Many continue to argue that these IHT changes should not proceed until there’s a better understanding of their implications.
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