Inheritance Tax Relief Threshold Set to Rise for Farmers and Businesses

In a landmark announcement on December 23, 2025, the UK government revealed plans to raise the Agricultural Property Relief (APR) and Business Property Relief (BPR) thresholds from £1 million to £2.5 million. These changes, set to take effect in April 2026, will offer significant tax relief to farmers and businesses, allowing spouses and civil partners to pass on up to £5 million in qualifying assets without paying inheritance tax. This increase in the inheritance tax relief threshold comes after extensive consultations with the farming community and business owners, ensuring that the revised thresholds better address the needs of family-run businesses while maintaining fairness across the tax system.

The Impact of the New Inheritance Tax Relief Thresholds

The increase in IHT allowances is part of the government’s commitment to making inheritance tax more equitable while ensuring that vital agricultural and business assets remain within families. Here’s a breakdown of the key changes:

Inheritance Tax Threshold Increase:

From April 2026, the APR and BPR thresholds will rise to £2.5 million per estate. This allows couples to pass on £5 million of agricultural or business assets tax-free, on top of existing allowances, providing much-needed relief to family-run businesses and farms.

Targeted Relief:

The  inheritance tax threshold increase is expected to benefit smaller estates. By raising the threshold, the government aims to reduce the number of estates that are affected by higher inheritance tax bills. This shift ensures that only the largest estates will be subject to inheritance tax under the reforms.

Impact on Estates:

• The number of estates claiming Agricultural Property Relief that are affected by the reforms will be halved, dropping from 375 to 185 in the 2026-27 fiscal year. 
• Around 85% of estates that qualify for APR will pay no additional inheritance tax due to the increased thresholds. 
• The number of estates affected by changes to Business Property Relief will also decline by a third, further simplifying the process and ensuring support is better targeted.

Why This Matters for Farmers and Businesses

Farming and small business sectors are vital to the UK’s economy, and this reform acknowledges the challenges these sectors face in passing businesses on to the next generation. The increase in thresholds will ensure that the tax burden remains manageable for family-run farms and businesses, allowing them to continue thriving without the fear of excessive inheritance tax obligations.

The changes reflect the government’s recognition of the importance of agriculture and rural businesses to local communities. By providing tax relief for smaller estates, the government is helping to preserve the legacy of family farms, which play a crucial role in food production and environmental management in the UK.

Key Benefits of the Increase in IHT Allowances

• Greater Support for Small and Medium-Sized Farms: The new threshold of £2.5 million will ensure that more farms and businesses, particularly family-run operations, are shielded from hefty inheritance taxes.
  
• Simplification of the Tax Process: The reforms are designed to reduce complexity, particularly for estates claiming Business Property Relief, making it easier for businesses to navigate the tax system.
  
• No Additional Inheritance Tax for Most Estates: The vast majority of estates will see no increase in inheritance tax payments due to the higher thresholds. This is expected to significantly reduce financial strain for many families.
  

How Apex Accountants Can Help

Apex Accountants understand the unique challenges faced by farmers, business owners, and their families when it comes to inheritance tax. Our expert team provides tailored advice to help ensure that your estate planning is as tax-efficient as possible. Here’s how we can assist:

• Inheritance Tax Planning: We help clients structure their estates to take full advantage of the available reliefs, ensuring that assets are passed on with minimal tax liability.
  
• Succession Planning for Farms and Businesses: We guide clients through the complex process of passing a farm or business on to the next generation, taking into account tax efficiency and long-term sustainability.
  
• Expert Advice on Agricultural Property Relief and Business Property Relief: Our team specialises in advising on APR and BPR, helping you navigate the thresholds and ensure compliance with the latest tax rules.

Frequently Asked Questions About New Inheritance Tax Relief Threshold

1. How will the new £2.5 million threshold benefit my business?

This increase will significantly reduce the number of businesses that are subject to inheritance tax. By raising the threshold, more family-run businesses can pass on their assets without incurring additional tax bills.

2. Will I still benefit from APR and BPR if my estate exceeds the £2.5 million threshold?

Yes, while assets above the £2.5 million threshold will receive 50% relief, the majority of your estate will still benefit from the full 100% relief, ensuring your family business remains protected.

3. How can Apex Accountants help with my estate planning?

We offer comprehensive estate planning services, including inheritance tax advice, succession planning, and strategies to maximise the benefits of APR and BPR. Our goal is to ensure your assets are passed on efficiently and in compliance with tax laws.

4. What happens if my spouse or civil partner passes away before the policy is introduced?

The new rules will apply to widowed spouses or civil partners as well. If your spouse has passed away before the policy is implemented, you can still benefit from the increased threshold of £5 million.

Conclusion

The government’s announcement to increase the threshold for Agricultural and Business Property Relief marks a significant step forward in supporting small businesses and farms. These reforms will reduce the inheritance tax burden on family-run businesses, helping ensure their long-term success. At Apex Accountants, we are here to assist you with navigating these changes, ensuring that your estate planning is tax-efficient and meets your long-term goals. For further guidance on how these changes affect your business or farm, contact Apex Accountants today. Let us help you secure the future of your estate while minimising your tax liabilities.