The Government has confirmed an expansion to inheritance tax (IHT) reliefs for agricultural and business assets, raising the proposed allowance for 100% agricultural property relief (APR) and business property relief (BPR) from £1 million to £2.5 million.
The announcement marks a significant shift from the original reforms outlined in the Autumn Budget 2024, following sustained lobbying from rural organisations, business groups and professional advisers.
From 6 April 2026, access to 100% APR and BPR will be governed by a new lifetime-style allowance. Once an individual exceeds the £2.5m threshold, qualifying assets will still benefit from relief, but at a reduced rate of 50%.
DY Director Alan Jebb welcomed the Government’s revised position.
“This increase to £2.5 million represents an acknowledgement of the realities faced by modern farms and family businesses. Land values and business assets can easily exceed £1 million without indicating significant wealth or liquidity. The higher allowance will help ensure that genuine trading enterprises are not unfairly penalised.”
Under the updated framework, individuals will be able to pass on up to £2.5 million of qualifying agricultural or business assets with full IHT relief. Any value above that threshold will continue to attract APR or BPR at 50% rather than the current 100%.
The Government has emphasised that the new structure is designed to target relief more effectively while still supporting long-term succession planning.
A key feature of the policy is the treatment of couples. The allowance will be fully transferable between spouses and civil partners, enabling couples to benefit from up to £5 million of assets qualifying for 100% relief. This mirrors the existing approach to the nil-rate band and residence nil-rate band, and will also apply to surviving spouses who were widowed before the policy takes effect.
Alan Jebb adds:
“The ability for couples to combine allowances is a crucial improvement. It will reassure many farming families and business owners who rely on intergenerational planning to maintain stability and continuity.”
These reforms are part of a wider package of IHT changes aimed at modernising the system and ensuring reliefs remain focused on genuine trading activity.