In an unexpectedly low-key move, the government has announced a major increase to the inheritance tax (IHT) threshold, lifting it to £2.5 million. What caught many by surprise wasn’t just the size of the change, but the timing: it was unveiled outside of a formal Budget, sidestepping the usual set-piece speeches and red-box theatrics.
For farmers, the announcement will feel particularly relevant. Rising land values have long pushed family farms into IHT territory on paper, even where cash flow is tight and assets are firmly tied up in the business. The fear of heirs being forced to sell land to meet a tax bill has been a persistent concern across the sector.
This change did not appear out of thin air. Farming unions, rural groups and advisers have spent years lobbying government, warning that existing thresholds were increasingly misaligned with the realities of modern agriculture. The higher limit looks very much like a response to that pressure and a recognition that productive farmland and family businesses should not be casually broken up on succession.
We will await the Finance Bill details promised for January 2026 to confirm the changes.
"An unexpected but welcome announcement from HMRC that will provide relief for many farming families and business owners. The increased threshold, alongside the recent budget announcement that the threshold is transferable between spouses, will provide a total threshold of £5m, as opposed to the £1m previous threshold, resulting in an additional £4m of relief at 20% and an IHT saving of £800,000."
Whilst this is good news and we must await for this to pass through Parliament via the Finance Bill, there will be many families and businesses who have already accelerated succession plans by making lifetimes gifts based on the lower thresholds of relief and there will be some exposure on these gifts that now might not have needed to be made. This u-turn by the government will now result in families and businesses re-assessing their plans, considering what level of planning is required. It will be vital for plans to be reconsidered and figures to be re-worked to assess the impact of the increased thresholds. It will be too late for many that planned ahead of the budget but does allow room for capital growth on the asset values.’
