The proposed changes to inheritance tax rules for farmers have been a long time coming – and provoked strong opposition from farming families and businesses along the way.
Announced during Budget 2024, the changes mark the end of unlimited relief for farmers from April 2026 although the threshold was increased in December 2025 from £1million to £2.5million to allow spouses and civil partners to pass on up to £5million worth in agricultural or business assets before having to pay inheritance tax.
What Are The Tax Changes?
From April 2026, farms valued at over £2.5million could be subject to a 20% inheritance tax charge.
This change was introduced to the Finance Bill in January and applies from 6 April 2026.
The law reforms affect Agricultural Property Relief (APR) and Business Property Relief (BPR), which are inheritance tax reliefs that can reduce or remove inheritance tax owed on certain agricultural or business assets when someone dies.
In the past, many assets could be passed down to younger generations free of inheritance tax. Now, however, assets will be subject to the new rules.
As a guide, the tax changes mean:
- Everyone will have a £2.5million allowance for qualifying assets that will be eligible for 100% APR or BPR
- Qualifying assets above the £2.5million threshold will receive 50% relief
- Any amount over the threshold could face an inheritance tax rate of 20%
- Unused allowances can be transferred between spouses and civil partners. In practice, this means that up to £5.65million worth of eligible assets can be passed on by combining the two £2.5million allowances for APR or BPR together with the two £325,000 nil rate bands which might apply
What Do The Inheritance Tax Changes Mean For You?
The recent increase in the APR and BPR thresholds from £1million to £2.5million is better news for many people who own a farm, land or a family business as it should ensure that only the largest estates are affected by the tax changes coming into force from April.
However, the changes due to come into force in April 2026 are still significant for many within the farming communities. The end of unlimited relief signals a big change to farming inheritance tax laws and it’s important to understand what the likely impact will be on your situation – and to be prepared.
As a guide, we’d advise you to do the following if you might be affected by the inheritance tax changes from April:
- Make sure your Will is up to date
- Check whether family trusts could reduce tax liabilities in the future
- Look into lifetime gifts option
- See if it’s worth restructuring your business
It’s important to plan ahead and seek professional legal advice on the options available to you to keep your tax liabilities to a minimum.
How We Can Help You To Protect Your Farm & Family
Our specialist agricultural law solicitors understand the changes to inheritance tax rules affecting APR and BPR, and the likely impact this will have on farming communities across the country. The good news is that there are many options available to you, and each option can be tailored to meet the needs of your situation and desires for the future.
We can help you to review the value of your land and assets, and to thoroughly consider the right estate plan for your family, as well as investigate the various options open to you to minimise your tax liabilities.
To speak to us about your farm, land or family business, and the best way to protect your farm and family for the future, please contact us on 01244 311 633 or email advice@bartletts.co.uk and we will be happy to help.
