The UK government has just confirmed an important update to Inheritance Tax (IHT) reliefs for farmers and business owners — a move that eases some of the financial pressure on family farms and enterprises but still leaves broader tax reforms in place.
From 6 April 2026, the threshold at which agricultural and business property relief applies at 100% is being raised from £1 million to £2.5 million per individual. This change builds on earlier proposals to cap the amount of farm and business assets that could be passed on tax-free but represents a significant softening of the original plan. Qualifying spouses and civil partners can now benefit from a combined £5 million tax-free allowance — double the £2.5million limit per individual — before any inheritance tax becomes payable on the value of farmland or business property.
In practical terms, this means many more family farms and family businesses will escape hefty tax bills when assets are passed down between generations. The revised threshold reflects concerns raised by farming organisations and MPs that the initial policy risked forcing sales of land or other drastic measures to cover tax liabilities.
While this is a welcome concession for rural communities, it comes amid wider IHT reforms that will affect more estates in the coming years. Core nil-rate bands (the amounts you can pass on tax-free) remain frozen, meaning rising property and asset values will continue to pull more families into the tax net. Additionally, from April 2027 unused pension funds are set to be included in estates for inheritance tax purposes — a change that could have significant implications for retirement planning unless careful steps are taken.
Overall, the government’s latest adjustment shows responsiveness to public pressure but also highlights the broader challenge many families now face in planning for the future under a tax system where thresholds stay fixed even as asset values rise.
