After the UK government announced that the level of the agricultural and business property reliefs threshold will be increased from £1 million ($1.34 million) to £2.5 million when it is introduced in April 2026, wealth managers react.
The UK government announced yesterday that it has increased the
£1 million ($1.34 million) agricultural and business property
reliefs threshold to £2.5 million from April 2026 – allowing
spouses or civil partners to pass on up to £5 million in
qualifying agricultural or business assets between them.
When Chancellor of the Exchequer Rachel Reeves, aka finance
minister, decided in the 2024 Autumn Budget that agricultural and
business property business relief would be reformed with assets
over £1 million facing a 20 per cent rate, it prompted a storm of
protests from farmers in particular. A fear has been that
family-run firms will be broken up, as cash-poor/asset-rich
owners sell to pay tax bills.
Under Reeves” changes, a 50 per cent relief would have
been applied in all circumstances on inheritance tax for
shares on the Alternative Investment Market (AIM). The change
would take effect from April 2026, and it was expected that it
would force more land onto the market in order to meet IHT bills.
However, with the change announced this week, just prior to the
Christmas holiday season, it offers a measure of relief, although
uncertainties remain. Here are some reactions from wealth
managers and accountancy firms.
Marc Acheson, global wealth specialist at Utmost Wealth
Solutions
“The government’s adjustment belatedly strikes a more pragmatic
balance between protecting generational ownership of farms and
other business properties with targeting relief where it’s most
needed. The £5 million per couple allowance is generous now for
farms and business owners in comparison with the looming
extension of IHT to pensions on estates in excess of a
permanently frozen nil rate band.
“It will be a welcome Christmas present for many farmers – as
well as business owners given that this will also apply to
Business Property Relief – who have long been fighting the
reforms announced at the Autumn 2024 Budget. The question will
now move on to whether the government seeks to amend any other
inheritance tax reforms. With the Chancellor set to review the
impact of the abolition of the non-dom tax status and publish
findings next year, it will be interesting to see the real-life
impact of this policy in terms of tax returns and receipts.”
Mark Lance, CEO of Moore UK
“The problem with today’s concession is that it may have come too
late for many UK businesses and farmers. With businesses subject
to IHT for the first time in generations, entrepreneurs had
been passing on their businesses before they die in
order to reduce their IHT bill. It may be too difficult to
unwind these transactions. Some of these transactions could
backfire, with businesses being passed on to people who are not
ready to manage them.
“There is a serious risk that business owners were forced into
these transfers by the changes to IHT to the potential detriment
of those businesses going forward. The dramatic changes to the
IHT rules mean that successors could be taking over businesses
before they are ready to take on the responsibility.
Consequently, they may lack the life experience, expertise and
know-how to manage these organisations effectively. The furore
around inheritance tax for business and farm owners since the
government first announced changes in Budget 2024 seems to keep
rolling on. On 23 December, the government announced yet another
change by increasing the nil band for business and farming assets
to £2.5m (up from £1m) per person. This is the second major
concession since the original proposals and just three months
before the new rules come into force from 6 April 2026.”
Paul Townson, a tax partner at BDO
“Many of our business and farming clients have been hugely
concerned about the new rules with some having been forced into
changing their succession plans already. For some, that effort
may now prove to have been unnecessary – assuming that there
aren’t even more changes to the proposals before next April.
While the increase in the nil band is a sensible move, it’s
difficult to understand why these changes have been announced in
such an incremental way and within less than a month after the
Budget. The stress this whole process will have caused to
business owning families should not be underestimated. Once the
new rules are finally implemented, the Government should commit
to a moratorium on any further tightening of the IHT rules for at
least 10 years. Then owners could have some certainty over how
they can pass on their business to the next generation.”
Adam Brewer, senior investment director at Rathbones
(Exeter office)
“Generally, this further dilution of the original punch will
likely be welcomed by farmers. However, let’s not forget they are
still contending with the usual pressures of hefty capital costs
and wafer-thin profit margins. Even the eventual £5 million
allowance may still fall short of preventing family farms from
being broken up, and ongoing political uncertainty only adds to
the anxiety. While the higher threshold may feel like a
pre-Christmas reprieve, many farmers still face a hefty
inheritance tax bill. This change doesn’t remove the need for
robust planning. Decisions on land use, business structure,
and valuations will ultimately determine the longevity of the
family farm. Families should review succession plans now
– timely advice can make the difference between relief and
regret.”
Robert Salter, director at Blick Rothenberg, an audit,
tax and business advisory firm
“The inheritance tax relief threshold rise to £2.5 million
announced [yesterday] by the Government is welcome news for
farmers and family-owned businesses. This is an early Christmas
present for farmers and family-owned businesses and should be
welcomed, particularly given that it was generally accepted that
no further changes would be made after the November Budget
referenced only the ability to transfer the allowance between
spouses/civil partners. However, it is disappointing that it has
taken the government so long to reach this decision, especially
given that the new rules have been heavily criticised by both
those impacted and the profession; the new rules have created a
lot of stress and angst to those impacted and the increased
threshold (and transferable band) goes some way to alleviating
that.”
“It is important that this new threshold is continually reviewed
by the government and updated to recognise the impact of
inflation on farmers and business owners over the coming years.
Otherwise, if the new £2.5 million threshold (£5 million with the
ability to transfer) will quickly become out-of-date and simply
‘push the problem’ of IHT on family-owned enterprises down the
road, but not remove the issue.”
Phil Kinzett-Evans, partner and head of tax at UHY Hacker
Young national accountancy group
“This is a clear last-minute concession from the government
– and it only exists because the original proposals caused
such widespread alarm among UK farmers and business owners.
Raising the APR and BPR threshold from £1 million to £2.5
million, and allowing it to be transferred between spouses, will
undoubtedly help some families. But it does not change the fact
that people have spent months planning for a much harsher tax
regime. During that period of uncertainty, many families made
irreversible decisions – selling land, restructuring
businesses or accelerating succession plans – because they
believed the rules were settled. Announcing such a significant
change this late in the process has real consequences. Once a
family business or farm is sold, that decision cannot simply be
undone.
“The Government now says most estates will be unaffected, but
inheritance tax is a relatively small part of the UK’s overall
tax take. These reforms did not need to be handled in a way that
caused so much distress and forced action. Tax policy should give
families the confidence to plan long-term, not push them into
rushed decisions based on shifting rules.”
David Lunn, partner at TWM Solicitors
“One point really jumps out from the announcement: the £5 million
figure being widely reported only applies if farmers are married
or in a civil partnership. If a couple is cohabiting but not
married or in a civil partnership, they will still be capped at
£2.5 million. While this is an improvement on the £1 million
threshold announced previously, it is a significant shift for
farmers who have long assumed their APR and BPR assets would be
exempt without limit. For those with farm or business assets
worth more than £2.5 million, this creates a powerful incentive
to consider marrying a long-term partner – something that
may not previously have felt necessary where inheritance tax was
not seen as a concern under the current rules, due to change in
April 2026.”
“From a technical perspective, the government has now
significantly widened the relief cap for Business and
Agricultural Property Relief. The 100 per cent relief ceiling has
increased from £1 million to £2.5 million per individual and,
crucially, this allowance remains transferable between spouses
and civil partners, allowing couples to pass on up to £5 million
of qualifying assets free from inheritance tax. Trusts will also
benefit from the same £2.5 million cap per trust, with any excess
value above these limits qualifying for 50 per cent relief, as
previously proposed.
“These changes follow significant opposition to the original
reforms. Industry reaction was swift and strong. A CBI Economics
survey for Family Business UK found that nearly a quarter of
family businesses, and 17 per cent of family farms, were already
cutting jobs or pausing recruitment in response. The National
Farmers’ Union described this as a ‘wake-up call’ for ministers,
warning of serious cuts to investment if the reforms went ahead
unchanged. The decision to raise the APR and BPR thresholds will
make a real difference for families with significant agricultural
and business assets. Allowing couples to shelter up to £5 million
from inheritance tax goes further towards supporting continuity
for family farms and businesses, and reduces the risk of forced
asset sales simply to meet tax liabilities.”
Claire Trott, head of advice at St James’s
Place
“The increase in the 100 per cent inheritance tax relief
available on Agricultural and Business Property to £2.5 million
should be welcomed, particularly following the 2025 Budget’s move
to allow these reliefs to be passed on to a surviving spouse on
death. This will be positive Christmas news for business owners
and farmers, for whom IHT has been a growing concern since the
reductions announced in the 2024 Budget.
“At the same time, further pressure has been added to estate
planning through the decision to bring unused pension funds
within the scope of inheritance tax from April 2027, alongside
the continued freezing of the nil rate band and residence nil
rate band. Taken together, these changes have made legacy
planning increasingly complex and reinforced the importance of
personalised, professional advice. Advice can help people
navigate policy changes calmly and sensibly, avoiding hasty or
ill-considered decisions. We have already seen many people make
unadvised changes to their plans, only to regret them later.”
James Ward, partner and head of private client
department at Kingsley Napley
“While many argue that any inheritance tax on farms and
businesses is fundamentally unfair, the increase to £5 million
per couple will make a huge difference and take many owners out
of the inheritance tax net. It is another positive change to this
much criticised piece of legislation, after the November Budget
announced that the reliefs could be transferred between spouses
or civil partners. While today’s change is positive, it will
cause issues with the planning already done. A number of farmers
have already gifted assets, often in a way which they would
rather not have done, and spent significant money on accountancy
and legal fees. For instance, gifting assets to the next
generation without adequate protection of those assets. Now all
that planning is effectively worthless but has led to more
complex ownership structures and potential family disagreements.
“Also there is no detail regarding non-farming businesses.
Clarification is needed to make sure this relief is across both
Agricultural Property Relief and Business Relief. Will it also
give trusts the same level of exemption? Effectively it has saved
a married couple £600,000 of inheritance tax, if they have
qualifying assets above £5 million, as their combined exemption
has increased by £3 million and tax is payable at 20 per cent.
However, many farms and businesses will still be liable to pay
inheritance tax, so the impact of the legislation will still be
felt.”