A Little Present for Farmers and Business Owners: HMRC’s Early Christmas Gift
Carly Drummond · Posted on: December 24th 2025 · read
In a move that has raised a few eyebrows, the government has made a surprise announcement of a significant increase to the inheritance tax (IHT) relief thresholds for agricultural and business property relief.
Agricultural Property Relief (APR) and Business Property Relief (BPR) 100% allowance was set to be limited to £1million from 6 April 2026 - but this has now been increased to a headline-grabbing £2.5 million.
What makes the announcement almost as notable as the policy itself is the timing: it arrived quietly and decisively, outside of a formal Budget. Traditionally, changes of this scale are saved for the theatrical set-piece for Budget Day, complete with red boxes and fiscal fanfare. This time, however, the government opted for a lower-key reveal. That alone signals how keen it was to get the message out quickly, and to a very specific audience.
For farmers and business owners, this will provide some relief with many warning the proposed £1million 100% relief thresholds risked forcing families to sell or break up businesses and farms simply to pay the IHT bill.
Farmers, industry groups, professional bodies and advisers have lobbied hard, arguing that IHT was increasingly out of step with business values and economic reality and that the £1million allowance was too low to result in the number of tax payers HMRC predicted would be affected by the restriction and that many more would in fact become liable to IHT as a result. This latest government announcement looks very much like it’s been driven by these determined lobbying efforts.
This latest government announcement looks very much like it’s been driven by these determined lobbying efforts.
By raising the threshold, the government is trying to position itself as a friend of farmers, entrepreneurs and long-term business builders, easing succession planning and offering greater certainty for the next generation.
HMRC suggests that as a result of this increase:
- The number of estates that will claim agricultural property relief (including those also claiming business property relief) affected by the reforms in 2026-27 halves from 375 to 185.
- Most affected estates will benefit, with IHT cut by hundreds of thousands of pounds for many families.
- The number of estates affected by the reforms claiming only business property relief – excluding those holding only AIM shares – will fall by a third, reducing complexity and ensuring support goes where it’s needed most.
- Around 85% of estates claiming agricultural property relief in 2026-27, including those that also claim for business property relief, are forecast to pay no more inheritance tax on their estates.
Careful planning is still required
The increased thresholds will allow for a potential £800,000 IHT saving between spouses, though careful planning is still required to maximise relief and mitigate IHT exposure. It also means those who have been considering options and implementing plans over the last 14 months will need to revisit these, review what they have done and reassess the current position under these new anticipated thresholds. There is ability now to pass on a higher value of business assets on death to the next generation, and the increased allowance also allows for an element of capital growth which is critical for growing businesses.
Valuations remain critical
These announcements do not, however, reduce the need for formal valuations of farms and businesses. In fact, they are likely to increase the administrative burden and associated costs for both executors administering estates and individuals making lifetime gifts.
Where 100% relief was previously unlimited, a formal valuation was not always required. Going forward, valuations will be necessary in most cases to demonstrate that business or farm assets fall within the 100% allowance, or to quantify the extent to which any excess value is subject to IHT at 20%.
Will we see this as a permanent shift?
"Whether this proves to be a permanent shift or a prelude to wider reform remains to be seen. But for now, farmers and business owners may feel they’ve received an unexpected, and rather generous, gift, unwrapped a little earlier than usual."
We await to see whether this increased allowance will also be available to trustees or if that will remain limited to £1million as the announcement from HMRC did not make reference to trusts.
To read more about the announcements on these changes from HMRC please visit GOV.UK: Inheritance tax reliefs threshold to rise to £2.5m for farmers and businesses - GOV.UK
For more information or guidance on the latest announcements, please speak to your local member of MHA staff or contact us today.
