Just days before Christmas, the Labour government delivered an unexpected, and for many, much needed change of direction on its proposed Inheritance Tax (IHT) reforms for agricultural and business property. For farming families who have spent the past year facing significant uncertainty, the announcement has landed as a genuine moment of relief.

When the 2024 Budget first introduced a £1 million per person cap on Agricultural and Business Property Relief (APR/BPR), the reaction across the rural economy was immediate and intense. From April 2026, any qualifying value above that cap would have only received relief at 50%, rather than 100% as previously. While the intention was to close perceived loopholes used by wealthier landowners, the impact on family run farms, many of whom are asset rich but cash poor, was profound. The prospect of having to sell land simply to meet a tax bill felt deeply at odds with the realities of agricultural life.

Months of tractor demonstrations, lobbying from rural MPs, and sustained pressure from the sector eventually prompted the government to soften its stance in the 2025 Budget. The original allowance became transferable between spouses and civil partners, and unused allowances could still be applied where the first death occurred before April 2026.

Now, in a more decisive shift, the threshold has been raised to £2.5 million per individual or, £5 million for where the allowance has been transferred from a previously deceased spouse, and not used on the first death if this occurred after 6 April 2026. This transferrable allowance will also be available where the deceased spouse died before 6 April 2026. couples. This change significantly reduces the number of farms expected to be affected; we’re told from from around 2,000 estates to roughly 1,100. For smaller and medium sized family farms, this offers a welcome degree of stability and the reassurance that their businesses can continue to pass from one generation to the next without forced asset sales.

For many in agriculture, land isn’t a luxury, it’s the foundation of their livelihood and identity. The National Farmers’ Union described the U turn as a “victory for common sense,” capturing the widespread sense of relief across rural communities. That said, questions remain. Larger estates will still face partial taxation, and there is ongoing uncertainty about how the rules will apply to Trusts and other succession structures.

It’s also worth acknowledging that many families have already taken significant steps to accelerate succession planning in response to the original 2024 proposals. Understandably, some are now wondering whether those decisions were necessary or whether they should revisit their plans considering the new thresholds.

For now, though, this policy shift brings a welcome dose of Christmas cheer to thousands of farming families. It recognises that safeguarding Britain’s agricultural backbone is not just a matter of tax policy, it’s about protecting heritage, community, and the continuity of food production for generations to come.

If you’d like help reviewing your existing succession plans or understanding how these changes may affect your estate, our team is here to guide you with clarity backed by years of experience in the sector.