As the threshold for agricultural property relief increased, inheritance taxes decreased

The government has now softened its contentious inheritance tax plans for farmers due to strong opposition to reforms to agricultural property relief

The government has announced a reversal of its contentious plans to lower inheritance tax relief on businesses and farms, increasing the taxable threshold for businesses from £1 million to £2.5 million.

The government announced plans to cut inheritance tax relief on businesses and agricultural properties valued at more than £1 million by 50% in the Autumn Budget of 2024. April 2026 was when the change was supposed to go into effect.

The modification would essentially impose a 20 percent tax rate on the value of inherited farms or businesses valued at more than £1 million, since inheritance tax is currently levied at 40 percent.

Campaigners and rural organizations were incensed by the proposals. They contended that imposing inheritance tax on farms, which might easily have nominal assets of £1 million or more without being particularly large or profitable enterprises, would compel the inheritors to sell off assets and shrink the farm in order to cover the cost of paying an IHT bill.

On November 26, the day of the 2025 Autumn Budget, farmers held a demonstration in Westminster.

On November 26, 2025, farmers protest Budget Day in London, England's Whitehall. Reforms to the inheritance tax relief for agricultural property were the target of the protest.

Today, the government announced that it will raise the threshold to 2.5 million, a partial retreat from its plans.

According to the government, this will enable spouses or civil partners to transfer up to £5 million in eligible business or agricultural assets between them before paying inheritance tax, on top of current allowances.

By combining two 2.5 million agricultural/business property allowances and two 325,000 nilrate bands that can be transferred between them upon death, married couples and civil partners can pass on a farm worth up to 5.65 million without having to pay inheritance tax.

Emma Reynolds, the environment secretary, stated, "We are making changes today to protect more ordinary family farms and we have listened closely to farmers across the country." "As a result of our raising the individual threshold from £1 million to £2.5 million, couples with estates up to £5 million will no longer be subject to inheritance tax. The "

What is relief from agricultural property?

One kind of inheritance tax relief is agricultural property relief (APR). When farmland is transferred to the following generation, it lowers the taxes that landowners and farmers must pay.

When it comes to business assets that are a part of the estate, business property relief is comparable. Family business owners will be happy because the threshold increase will also apply to business property relief.

Farmers typically have a lot of expensive assets, like land or machinery, that are difficult to split up and sell to pay an inheritance tax bill, according to critics of the APR reforms.

"Although farm asset values can be high, the returns are often low," stated Sean McCann, a chartered financial planner at NFU Mutual, a financial advisory firm. In many cases, the next generation would inherit smaller, less productive farms as a result of the land and buildings having to be sold upon the farmer's death in order to pay the tax bill. The "

For owners of relatively small family-owned farms who wanted to transfer ownership to their offspring, that would be especially acute.

According to government estimates, the number of estates subject to inheritance tax on their farms or businesses will decrease by half in the 2026 - 2027 tax year, from 375 to 185, due to the new threshold of 2.5 million.

"Many farming and business-owning families will still face a large inheritance tax bill, even though this is a significant improvement on the previous proposals and will remove many smaller farms and businesses from the inheritance tax net," McCann stated.