Inheritance Tax: Agricultural Property Relief and Business Property Relief

The Government have announced changes to the forthcoming inheritance tax reforms to agricultural property relief and business property relief. The Government announced on 23 December 2025 that the allowance for 100% rate of relief will be increased from £1 million to £2.5 million when it is introduced on 6 April 2026. This means a couple will now be able to pass on up to £5 million of agricultural or business assets tax-free between them, on top of the existing allowances such as the nil-rate band.

Taken together with the reform announced at Budget 2025, which made any unused allowance transferable between spouses or civil partners, it is now the case that widows and widowers will benefit from up to £2.5 million of their spouse’s allowance, even if their spouse passed away many years ago.

This increase in the allowance comes after listening carefully to feedback from the farming community and family businesses. The change means the Government are going further to protect more farms and businesses, while maintaining the core principle that more valuable agricultural and business assets should not receive unlimited relief.

This further reduces the number of estates forecast to pay more inheritance tax and further reduces the liability for many of the remaining estates.

Compared with Budget 2025, the expected number of estates claiming agricultural property relief, including those also claiming business property relief, affected by the reforms in 2026-27 halves from 375 to 185. 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 under these changes.

Excluding estates only holding shares designated as “not listed” on the markets of recognised stock exchanges, the reforms are also now expected to result in up to 220 estates across the UK only claiming business property relief paying more inheritance tax in 2026-27. This is a reduction from up to 325 such estates forecast to pay more at Budget 2025. This means that just over 80% of such estates making claims are forecast to not pay any more inheritance tax.

The increase to the allowance will be reflected in a Government amendment to the Finance (No. 2) Bill, and this was tabled on 2 January. This will be debated in Committee of the whole House next week, on 12 January.

There is, as the Government have set out, a need to reform agricultural property relief and business property relief. As such, after the increase in the allowance, and subject to certification by the Office for Budget Responsibility, the Government expect the reforms to raise around £300 million in 2029-30.

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