New £2.5m Inheritance Tax Relief for Family Farms
Five months after it came into force, many family farm and business owners are only now discovering what the government's revised inheritance tax relief actually means for them — and whether their succession plans still add up. Since 6 April 2026, Agricultural Property Relief and Business Property Relief have been capped at a combined £2.5 million per person for 100% relief, up from the £1 million figure originally proposed, following months of pressure from farming groups and family business owners.
What Changed in April and Why It Matters Now
Under the new rules, qualifying agricultural and business assets up to £2.5 million are still fully exempt from inheritance tax. Above that threshold, relief drops to 50%, meaning the excess is effectively taxed at 20% rather than the standard 40% rate. It's a significant climbdown from the original £1 million cap announced in 2024, but it's still a fundamental change from the unlimited relief that family farms and businesses could previously rely on.
For estates now going through probate, or being planned for the first time since April, this isn't an abstract policy shift — it's a real number that determines how much inheritance tax a family will actually owe. A farm or business valued well above £2.5 million, once considered fully shielded from inheritance tax, may now generate a bill that forces heirs to sell land, machinery, or a stake in the business simply to pay it.
How Married Couples and Civil Partners Can Use the Allowance
One important detail that's easy to miss: the £2.5 million allowance is transferable between spouses and civil partners in the same way the standard nil-rate band already is. That means a couple who plan their estates jointly can potentially shelter up to £5 million of qualifying agricultural or business assets — and, once the nil-rate band and residence nil-rate band are factored in alongside it, as much as £6.3 million per couple.
Achieving that combined figure isn't automatic, though. It depends on how assets are owned, how wills are structured, and whether both spouses' allowances are actually preserved rather than accidentally wasted — a common risk when older wills leave everything outright to the surviving spouse without accounting for the new relief structure.
What Family Farm and Business Owners Should Check Now
If your succession plan predates April 2026, it's worth revisiting with this cap specifically in mind. Questions worth asking include: does the current will structure make full use of both spouses' £2.5 million allowances, or could one be lost? Is the business or farm valued in a way that reflects current market conditions, or is it based on an outdated valuation that understates the exposure? And has any partial transfer of assets — a step some families are exploring to bring values under the new threshold — been properly documented and timed to satisfy the seven-year gifting rules?
The allowance will be index-linked from April 2031, but until then it stays fixed in cash terms — meaning rising land and business values could quietly push more estates over the threshold in the coming years, even without any change in ownership.
The Risk of Doing Nothing
The families most exposed here are often those who assumed, reasonably, that agricultural and business assets were simply outside the inheritance tax system altogether. That assumption is no longer safe. Without proactive planning, the first time some families discover the shortfall will be when a solicitor is calculating the tax bill on a loved one's estate — a difficult moment to be facing an unplanned six-figure liability.
What Should You Do Next?
If your estate includes a family farm, business, or a stake in one, it's worth having your succession plan reviewed against the new £2.5 million allowance sooner rather than later. QualitySolicitors' first contact team can connect you with a wills and probate solicitor near you who understands agricultural and business property relief and can help make sure your family keeps as much of what you've built as possible. Get in touch today to start the conversation.