Issued by: Department for Environment, Food & Rural Affairs, and HM Treasury

£1m Agricultural and Business Property Reliefs threshold increased to £2.5m 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 today (Tuesday 23 December) 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. This allows 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 has listened to concerns of the farming community and businesses about the reforms.

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 6 April.

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 to:

• Increase the threshold at which 100% Agricultural Property Relief and Business Property Relief applies from £1 million to £2.5 million per estate, with 50% relief continuing to apply to qualifying assets above that level.

• Given the allowance will be transferable between spouses, a surviving spouse or civil partner will be able to pass on up to £5 million of qualifying agricultural and business assets tax-free, on top of existing nil rate bands. This will apply to people who are widowed and have lost spouses or civil partners before the policy was introduced.

The government remains committed to making the tax system fairer by reducing the generous inheritance tax reliefs available to owners of large agricultural and business estates, while continuing to recognise the importance of farms and businesses to local communities and the wider economy. The revised approach continues to ensure that qualifying agricultural and business assets are taxed at a much lower effective rate than most other assets. The changes we are implementing reflects the concerns that have been raised while preserving the majority of the revenue from reform to help cut debt and borrowing and fund public services. The costings for today’s announcement will be incorporated into the next OBR forecast.

Today’s announcement follows the government’s commitment to establish a new Farming and Food Partnership Board to bring together senior leaders from farming, food production, retail, finance and government to take a practical, partnership-led approach from farm to fork to strengthen our food production.

It builds on updates to the planning rules, via the National Planning Policy Framework, to cut unnecessary red tape and help farmers expand their businesses with easier approvals on farm reservoirs, greenhouses, polytunnels and farm shops, boosting food production and rural growth.

ENDS

Notes to editors

• Further explainer: https://www.gov.uk/government/news/what-are-the-changes-to-agricultural-property-relief

• 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.

• These measures are on top of:

• The government has allocated a record £11.8 billion to sustainable farming and food production over this Parliament.

• From 2026/27 onwards, annual investment of £2.7 billion for farming and nature recovery.

• Funding for Environmental Land Management (ELM) schemes rising 150%, from £800 million in 2023/24 to £2 billion by 2028/29, with around 50,000 farm businesses enrolled – covering half of all farmed land in England.

• Red diesel continues to benefit from an 80% tax discount compared to full duty diesel (10.18p vs 52.95p per litre), supporting farm operating costs.

Further detail on number of estates affected and costs:

• These changes will result in the number of estates claiming agricultural property relief (including those also claiming business property relief) affected by the reforms in 2026-27 falling from 375 to 185.

• Overall, the reforms are now expected to result in up to 1,100 estates across the UK paying more inheritance tax in 2026-27. This is a reduction from around 2,000 estates forecast to pay more at Autumn Budget 2024 and 1,400 forecast to pay more at Budget 2025.

• Of the 1,100 estates, up to 185 estates claiming agricultural property relief, including those also claiming business property relief, are expected to pay more inheritance tax in 2026-27.

• This a reduction from up to 375 estates forecast to pay more at Budget 2025.

• Excluding estates only holding shares designated as ‘not listed’ on the markets of recognised stock exchanges, the reforms are now expected to result in up to 220 estates across the UK only claiming business property relief paying more inheritance tax in 2026-27, a reduction from 325 such estates forecast to pay more at Budget 2025. The treatment of AIM shares was unaffected by today’s announcement.

• As is normal practice, the Exchequer cost of these changes will be considered by the Office for Budget Responsibility (OBR) and published at the Spring Forecast.

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