The UK Government has doubled the Inheritance Tax (IHT) relief for qualifying “business property” and “agricultural property,” increasing the 100% relief threshold from £1 million to £2.5 million. This change, announced in December 2025 and, comes fourteen months after ministers introduced the most significant IHT reforms for farms and estates in a generation. Less than a month earlier, in November 2025, the Government confirmed that any unused allowance can now pass to a surviving spouse or civil partner, bringing these reliefs in line with others. These updates will be widely welcomed across the rural and agricultural sectors.
What does this mean for you?
While the rules surrounding IHT are complicated, in essence the proposed changes mean that on death, each individual will be able to pass on £2.5 million of assets, which qualify as business property or agricultural property, free of IHT.
After any other allowances and reliefs, if there is any remaining business or agricultural property forming part of a person’s estate, this will be subject to IHT; however instead of the usual 40% tax rate, IHT will be levied at 20%.
With any unused allowance transferring on death, couples who are married or are in a civil partnership will be able to pass on a total of £5 million worth of qualifying business or agricultural property free of tax, before utilising any other allowances and reliefs.
Since the changes to IHT relief were first announced in October 2024, many farm and estate owning families been working on strategies to pass on assets to help preserve the wider business. While the increase in these allowances is undoubtably good news, we need to bear in mind that any gifts made within seven years of the death of an individual still form part of the deceased’s estate for the purposes of IHT. Anyone who dies following April 2026 will benefit from this higher allowance, but we need to be cautious when assessing the tax position in light of these changes.
What should you be doing now?
The increased allowances will go some way to tackling a potential IHT bill. However, for many families, this will not be a silver bullet. In recent years we have seen a huge rise in the value of agricultural land and machinery. It is unlikely that these allowances will rise with inflation so, while your estate may fall below the threshold at this stage, that may not be the case in the future.
It is therefore important to keep your potential tax exposure under periodic review – much in the same way that will already happen with Income and Corporation Tax. We are likely to continue to see assets being passed on prior to death, but with continual monitoring, this can be structured to balance IHT efficiency, and your income needs.
It is also important to bear in mind that securing these valuable reliefs is not straightforward. We are already seeing a significant increase in the number of compliance checks by HMRC in estates where there are Agricultural Property Relief (APR) and Business Property Relief (BPR) claims. This is only likely to intensify after April 2026.
Sometimes, assets which you may think would obviously qualify for relief don’t, or they may not qualify for full relief. Between now and April 2026, it is important to work with your professional advisors to determine what the potential IHT exposure may be in detail and consider where there is scope to restructure your business in a cost-effective way to maximise the reliefs available to you.
You should also give some thought to your Wills. Carefully structured Wills can be very helpful in preventing IHT being payable on the death of the first spouse or civil partner. However, we need to take care to ensure we know the potential tax implications of the current arrangement and how any IHT liability would be funded. We also need to make sure that your Wills reflect your wishes, both in terms of providing for a surviving spouse or civil partner, but also in preserving assets for the next generation.
It is not too late to take steps which may lead to significant tax savings for your loved ones and help preserve your family business.
To discuss the government’s proposed changes, or to start work on your succession plan, please contact Cameron on 0131 624 6808, or your usual Thorntons contact.
