Inheritance Tax for farmers: Major change announced
The government has back tracked on its controversial inheritance tax reforms for farmers, raising the planned threshold from £1 million to £2.5 million.
The move, which comes after months of lobbying from the farming community, takes effect on 6 April (2026) and will almost halve the number of estates expected to pay more inheritance tax (IHT).
Most farming estates will benefit from the decision with IHT cut by hundreds of thousands of pounds for many families with only the largest estates still affected.
Why were the initial IHT changes for farmers so contentious?
In her first budget in 2024, chancellor Rachel Reeves announced plans to reverse the 100% IHT relief on agricultural assets that had been in place since the 1980s.
This was to be done by capping the tax reliefs (Agricultural Property Relief (APR) and Business Property Relief (BPR)) that help farmers and business families pass on assets without IHT charges at £1 million.
As a result, agricultural assets worth over £1 million would be taxed at 20%.
This, said farmers, threatened smaller farms and family run-businesses with a crippling tax burden, jeopardising their future and leaving them under a cloud of uncertainty.
Some farmers even said they were contemplating suicide over the changes.
What is the new situation for farmers and IHT?
In a partial U-turn, from 6 April the £1 million IHT cap on inherited agricultural assets will be raised to £2.5 million.
This can be transferred between spouses like the current Nil Rate Band for IHT and means that farming and business married couples and civil partners can pass up to £5 million in qualifying assets without paying IHT in addition to the normal IHT allowances.
Farmers have welcomed the move but say it does not go far enough arguing that only a full reversal is fair.
Get in touch
Succession planning for farming families is often complex. Partner Sarah Woodward specialises in working with individuals and families in the agriculture sector, involving farms and estates entitled to APR and BPR.
Sarah says: “A great deal of the work I do is complex and involves changing legislation. It’s my job to ensure that it is dealt with correctly and all tax advantages and reliefs are taken advantage of… and to do all of this in an efficient, friendly way that makes it easy for people to understand.”
Wards Solicitors wins high praise in the 2026 edition of the independent Legal 500 guide of outstanding legal professionals for its exceptional professional service standards and high levels of technical expertise.
Contact Sarah for a free initial appointment. She can also meet you in one of our offices or at your home:
- Phone Sarah: 01275 850470
- Email Sarah: Sarah.Woodward@wards.uk.com