Inheritance Tax U-Turn: Government Boosts Relief for Farms and Family Businesses

The government has raised inheritance tax relief thresholds for farms and family businesses from April 2026. Here’s what’s changed and how to plan.

A major policy reversal and a big win for family enterprises

In a notable late-2025 reversal, the government confirmed a significant rethink on inheritance tax (IHT) reliefs for farms and family-owned businesses. After months of criticism and mounting pressure from the agricultural and rural business communities, ministers announced a substantial increase in the value of assets that can qualify for full relief.

The move has been widely described as a U-turn and one that reflects just how strongly the original proposals missed the mark for modern farming and trading businesses.

From 6 April 2026, the threshold for full Agricultural Property Relief (APR) and Business Property Relief (BPR) will rise:

• From £1 million to £2.5 million per estate
• Up to £5 million can pass free of inheritance tax for married couples or civil partners who jointly own qualifying assets

Above these levels, relief will still apply but at a reduced rate. The intention is clear: protect the vast majority of working farms and trading businesses, while curbing unlimited relief for the very largest estates.

The original £1 million cap sparked an immediate backlash. Farmers and business owners argued it bore little resemblance to real-world asset values – especially in areas where land prices and commercial property values have soared over the past decade.

There was genuine concern that families could be forced to sell land, livestock, or core business assets simply to fund an IHT bill. For many, that would have undermined long-term succession planning and threatened the survival of family-run operations.

Sustained lobbying, public protests, and widespread media coverage kept the issue firmly in the spotlight. Ultimately, the government conceded that the original threshold risked serious unintended consequences for ordinary family enterprises.

Ministers have positioned the revised rules as a “balanced solution”. The stated aim is to:

• Protect productive farms and genuine trading businesses
• Reduce the number of estates caught by the reforms
• Ensure inheritance tax still applies more effectively to very large, asset-heavy estates

Crucially, the government has acknowledged the economic and social importance of family farms and SMEs — particularly in rural communities where they often underpin local employment and supply chains.

While the increased thresholds are welcome, they don’t remove the need for careful inheritance tax planning.

Key considerations still include:

• Asset values and future growth
• Ownership and partnership structures
• Interaction with other reliefs and allowances
• Timing of succession and lifetime planning

For estates approaching  or exceeding the new limits, early advice remains essential. Getting the structure right now can help avoid unexpected tax bills later.

This increase in inheritance tax relief marks a clear shift in government policy — and a reminder that sustained engagement can influence tax decisions. For family farms and businesses, it provides reassurance heading into the 2026 tax year.

But with reliefs still capped and tapered above certain levels, inheritance tax planning remains very much on the agenda. The rules may have softened, but the stakes are still high.

If you need help understanding how these changes affect your farm or business — or want to review your succession and inheritance tax planning — professional advice now can help protect what you’ve built and avoid costly surprises later.