Proposed changes to inheritance tax reliefs for farms and family businesses have been among the most contentious measures announced in recent Budgets. Following sustained criticism particularly from the agricultural sector the government has now confirmed a significant softening of its original plans. So what has changed?
Original proposal: a hard cap on relief
The Autumn 2024 Budget set out plans to remove unlimited 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) from April 2026. In their place, the government proposed a single combined cap of £1 million, with assets within that threshold continuing to benefit from full relief and any excess qualifying for relief at only 50%.
The announcement prompted strong opposition from the farming community in particular, where land values can be high but income relatively modest. Many argued that the proposals risked forcing family farms to sell land or businesses simply to meet inheritance tax liabilities. Tractor protests in central London became a recurring feature in the months that followed.
First concession: transferability
One of the early criticisms was that the proposed £1 million allowance would be lost if unused on first death, rather than being transferable between spouses or civil partners. This was partially addressed in the Autumn 2025 Budget, which confirmed that the allowance would be transferable, mirroring the treatment of the existing nil rate band.
Further change announced
Less than a month later, the government has gone considerably further. Under the latest announcement, each individual will instead have a £2.5 million allowance, which will also be transferable between spouses or civil partners. This applies to assets qualifying for both APR and BPR, but is expected to be of greatest relevance to farming families given the concentration of value in agricultural land.
In practice, this means that qualifying agricultural and business assets worth up to £5 million could potentially pass free of inheritance tax on second death, with any excess benefiting from 50% relief rather than the full exposure originally proposed.
Political context
Accompanying the announcement, the Environment Secretary stated that the government had “listened closely to farmers across the country” and was acting to protect ordinary family farms. Given the visibility and persistence of opposition since the original announcement, some may question why these concerns were not addressed sooner.
What this means for planning
While the revised proposals are substantially more generous than those first announced, the reforms still represent a meaningful change to the inheritance tax landscape from April 2026. Farming families and business owners should review existing succession and estate planning arrangements to ensure they remain appropriate and remain alert to further refinements as the legislation progresses.