Inheritance Tax changes for farms and businesses: New £2.5m relief and transferable allowances

The government has confirmed that the threshold for Inheritance Tax relief on qualifying farm and business assets will now be £2.5 million from 6 April 2026.

In the 2024 Budget, the government announced that the threshold would be £1 million from 6 April 2026, but this has now been revised following protests by the farming community and feedback from business owners. The threshold will apply to both Agricultural Property Relief (APR) and Business Property Relief (BPR), which reduce or eliminate Inheritance Tax on qualifying assets.

Under the reform, any unused part of the £2.5 million allowance can be transferred to a surviving spouse or civil partner. This means couples will be able to pass on up to £5 million of qualifying agricultural or business assets between them, on top of existing thresholds and exemptions. The government has made clear that this spousal transfer also applies where the first death occurred before the new rules take effect, so long as the second death is on or after 6 April 2026.

For many families, this means more of the farm or business can be passed to the next generation without a tax bill arising solely because of the value of essential working assets. In practical terms, a married couple or civil partners could pass on up to £5.65 million tax-free where they combine two £2.5 million APR/BPR allowances with their two £325,000 nil-rate bands, assuming the usual Inheritance Tax thresholds are available. This is because the new APR/BPR allowance sits alongside the existing nil-rate band rules.

These changes are part of the government’s broader update to APR and BPR and are intended to protect more typical family farms and trading businesses while ensuring very large estates contribute more. The government’s own analysis suggests the higher allowance will significantly reduce the number of estates facing higher Inheritance Tax under the reforms.

If you own farming or business assets, it is sensible to review your Will and succession plans ahead of April 2026 to make sure you can use the new £2.5 million allowance fully and, where relevant, the spousal transfer to reach up to £5 million of qualifying assets tax-free. You should also consider how your nil‑rate bands interact with the new APR/BPR allowance.

Please get in touch with the Private Wealth & Succession team on 0113 207 0000 if you have any questions.