ON Tuesday, December 23, the government announced 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 - a major u-turn and a relief for family farms.

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 at Budget 2024, the government says it has listened to concerns of the farming community and businesses about the reforms.

It said: “Having carefully considered this feedback, the government is going further to protect more farms and businesses, while maintaining the core principle that the most valuable agricultural and business assets should not receive unlimited relief. The change will be introduced to the Finance Bill in January and will apply from April 6.

“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.

“Today’s announcement will halve the number of estates claiming Agricultural Property Relief (including those also claiming Business Property Relief) who are affected by the reforms – better targeting the relief.

“As a result:

• The 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.

• Most estates will benefit, with inheritance tax cut by hundreds of thousands of pounds for many families.

• 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.”

Environment Secretary Emma Reynolds said: “Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming.

“We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms. We are increasing the individual threshold from £1m to £2.5m which means couples with estates of up to £5m will now pay no inheritance tax on their estates.

“It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities.”

To deliver this, the government will introduce an amendment to the Finance Bill 2025.

The u-turn has been largely welcomed by the National Farmers’ Union and Country Land and Business Association which have campaigned against it for the past 14 months.

The Conservatives say the decision has been “snuck out” while Parliament is not sitting.