Context from The MGroup
Changes to inheritance tax reliefs can have long lasting implications for family farms and owner managed businesses. Following significant engagement from the agricultural and business community, the government has now adjusted its approach ahead of the 2026 tax year.
The article below explains what has changed, why the government reversed its position, and what this means in practice for families planning ahead.
In late 2025, the government confirmed a significant change of direction on inheritance tax reliefs for farmers and family owned businesses. Following sustained criticism of earlier proposals, ministers announced an increase in the threshold at which full inheritance tax relief applies to qualifying agricultural and business assets. The move has been widely described as an about face and reflects the strength of opposition from the farming and rural business community.
What has changed
From 6 April 2026, the threshold for full Agricultural Property Relief and Business Property Relief will rise from £1 million to £2.5 million per estate. Where spouses or civil partners jointly hold assets, this effectively allows up to £5 million of qualifying property to be passed on free of inheritance tax.
Relief will still be available above this level, but at a reduced rate. The revised structure aims to protect the majority of working farms and trading businesses, while limiting unlimited relief for the largest estates.
Insight from our team
“This change recognises the reality of modern asset values. For many families, the earlier threshold simply did not reflect the scale of working farms or established trading businesses.”
Ollie Squire, ACCA
Why the government reversed its position
The original proposals, announced as part of earlier Budget measures, triggered strong reactions across the agricultural sector. Many farmers argued that a £1 million cap bore little resemblance to current land and business values, particularly in areas where farmland prices have risen sharply over the past decade.
There was widespread concern that families could be forced to sell land or business assets to fund inheritance tax liabilities. This risk undermined long term succession planning and threatened the viability of family farms. Protests, lobbying by representative bodies and sustained media attention kept the issue firmly in the public eye.
In response, the government acknowledged that it had listened to feedback and accepted that the earlier threshold risked unintended consequences for ordinary family enterprises.
Government rationale
Ministers have presented the revised threshold as a balanced solution. The stated aim is to protect productive farms and genuine trading businesses, while ensuring that inheritance tax applies more effectively to very large estates.
The government has also highlighted the economic and social importance of family farms and small to medium sized businesses, particularly in rural communities. By raising the threshold, it expects to reduce significantly the number of estates affected by the reforms compared with the original proposals.
Reaction from the sector
Farming organisations and business groups have broadly welcomed the announcement, describing it as a sensible and pragmatic adjustment. For many families, the higher threshold removes immediate pressure and provides greater certainty when planning for succession.
However, some commentators have noted that the revised rules do not remove inheritance tax exposure entirely. Larger estates and asset rich businesses will still need to consider how reduced relief above the threshold affects long term planning.
Insight from our team
“While the higher threshold offers breathing space, it does not remove the need for structured planning. Families still need to understand how ownership, values and reliefs interact over time.”
Jordan Lyne
Planning implications
For farmers and business owners, the change provides welcome reassurance, but it does not remove the need for careful inheritance tax planning. Asset values, ownership structures, partnership arrangements and the interaction with other reliefs remain critical factors.
Early planning remains essential, particularly for estates approaching or exceeding the new thresholds. Professional advice can help families understand how the revised rules apply to their circumstances and avoid unexpected liabilities.
How The MGroup can support inheritance tax planning
Inheritance tax planning often sits alongside wider considerations such as succession, ownership structures and long term business strategy. Our team supports families and business owners with:
- Inheritance tax and estate planning
- Succession planning for family owned businesses
- Structuring assets and ownership efficiently
- Ongoing advice as tax rules evolve
Taking advice early can help protect both the business and the family behind it.
Conclusion
The increase in inheritance tax relief thresholds represents a clear shift in government policy. It demonstrates how sustained engagement from affected sectors can influence tax decisions and provides reassurance for family farms and businesses heading into the 2026 tax year.
However, with reliefs still capped and reduced above certain levels, inheritance tax planning remains firmly on the agenda.
Further UK Government guidance
‘This official announcement explains that from 6 April 2026 the thresholds for full Agricultural Property Relief and Business Property Relief will be raised, effectively reducing the number of estates affected and helping family farms and trading businesses. It also clarifies how the threshold increase works and the rationale behind the government’s policy shift.‘