The government has increased the threshold for Agricultural Property Relief (APR) and Business Property Relief (BPR) from £1 million to £2.5 million.
The cap on 100% inheritance tax relief available for agricultural and business property was first announced in the 2024 Autumn Budget.
The government said most estates would not be affected but several groups strongly criticised the change.
The Country Land and Business Association said the changes could affect 70,000 farms, the National Farmers’ Union (NFU) said the reforms would have significant negative consequences for small working farms, and Family Business UK (FBUK) said the changes would have a “chilling effect” on the UK economy.
The government today said “having carefully considered this feedback”, the cap on relief will be increased from £1 million to £2.5 million. The change applies from April 2026.
In the 2025 Autumn Budget, the government announced that the allowance will be transferable between spouses, a surviving spouse or civil partner, so they will be able to pass on up to £5 million of qualifying agricultural and business assets tax-free.
The government said due to the change, 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 £1 million to £2.5 million which means couples with estates of up to £5 million 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.”
Reaction to the increased threshold for Agricultural Property Relief and Business Property Relief
NFU president Tom Bradshaw said:
“Changes to Agricultural Property Relief and Business Property Relief announced in last year’s Budget came as a huge shock to the farming community.
“Until that moment, the best tax planning advice was to hold on to your farm until death and pass it on to the next generation who could continue to run a viable farming, food producing business.
“The original changes to APR and BPR, contained within the Finance Bill, resulted in a pernicious and cruel tax, trapping the most elderly and vulnerable people and their families in the eye of the storm. The NFU and its members have stood strong for what we believed in.
“I am thankful common sense has prevailed and government has listened.”
Gavin Lane, president of the Country Land and Business Association, said:
“This change will come as an enormous relief to thousands of family farms across the country who faced seeing their businesses taxed out of existence. The government deserves credit for recognising the flaws in the original policy and changing course.
“However, this announcement only limits the damage – it doesn’t eradicate it entirely. Many family businesses will own enough expensive machinery and land to be valued above the threshold, yet still operate on such narrow profit margins that this tax burden remains unaffordable.
“On that basis, we thank ministers for the constructive dialogue, we look forward to working in partnership to grow the rural economy, whilst continuing to call for these reforms to be scrapped entirely.”
FBUK chair Steve Rigby said:
“This is a welcome step by the government which will bring certainty and peace of mind to thousands of smaller family businesses and farms. It shows the government has been prepared to listen to the economic and moral arguments that we and other organisations have made on the importance of these policies.
“Family businesses and family farms are critical to the fabric of the UK’s economy and food production. For decades they have relied on BPR and APR to facilitate a smooth handover of the business when an owner dies. Raising the cap to £2.5m, or £5m for married couples, is the right thing to do to reinvigorate investment and growth among these smaller family businesses and farms.
“Nevertheless, retaining the cap for businesses valued higher than this remains a material challenge and we look forward to continuing our work with government on solutions that will give them the confidence they need.”