Inheritance tax reliefs threshold to rise to £2.5m for farmers and businesses

The Agricultural and Business Property Reliefs threshold will increase from April 2026 – allowing spouses or civil partners to pass on up to £5m in qualifying agricultural or business assets between them.

The government has announced today (Tuesday 23 December) that the level of the Agricultural and Business Property Reliefs threshold will be increased from £1m to £2.5m when it is introduced in April 2026.

This will allow spouses or civil partners to pass on up to £5m in qualifying agricultural or business assets between them before paying inheritance tax, on top of existing allowances.

Following the reforms to Agricultural and Business Property Reliefs announced in the 2024 Budget, the government has listened to concerns from the farming community and businesses about the proposed reforms.

Raising the threshold will significantly reduce the number of farms and business owners facing higher inheritance tax bills under the reforms, ensuring that only the largest estates are affected.

As a result:

• Most estates will benefit, with inheritance tax cut by hundreds of thousands of pounds for many families.
• The number of estates claiming agricultural property relief (including those also claiming business property relief) affected by the reforms in 2026-27 will halve from 375 to 185.
• 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.
• A married couple or civil partners can pass on a farm worth up to £5.65 million tax free, by combining two £2.5 million agricultural/business property allowances and two £325,000 nil rate bands that can be transferred between them on death.

REACTION FROM NFU SCOTLAND

NFU Scotland has welcomed this major shift in UK Government inheritance tax policy, following an intensive 14-month lobbying campaign by farming unions across the UK.

The announcement marks a significant victory for Scottish agriculture, easing what had been widely described as one of the most serious generational threats to the future of family farming in recent decades. Under the revised arrangements, spouses or civil partners will be able to pass on up to £5 million in qualifying agricultural or business assets between them, substantially reducing the potential inheritance tax burden on many farming families.

While welcoming the announcement, NFU Scotland has stressed that challenges remain for the sector, from volatile input costs and market pressures to climate change and ongoing policy reform. However, the union believes the revised inheritance tax thresholds provide a more stable platform for long-term planning and succession.

For many Scottish family farms, the change represents not just a financial adjustment, but renewed confidence that the next generation will have a realistic chance to continue farming the land they call home.

IN SUMMARY

The Government has announced today (23 December 2025) that the threshold at which assets can qualify for Agricultural Property Relief and Business Property Relief at 100% will be increased from £1 million to £2.5 million. Relief at 50% will continue to apply to qualifying assets exceeding this threshold. The increase in threshold will apply from 6 April 2026.

Please get in touch with a member of the team to discuss how these changes may impact on you and your business.