The new threshold, which was originally set to drop to £1 million from April 2026, will now be raised to £2.5 million for individuals, allowing couples to transfer up to £5 million in agricultural or business property without incurring IHT.
Under the revised plan, the 100% relief rate will be set at £2.5 million per individual, with a 50% relief rate applying beyond that. This means a couple will now be able to pass on up to £5 million of agricultural or business property between them, in addition to existing tax exemptions such as the nil-rate band.
This change is expected to provide significant relief for farmers and business owners, particularly in regions like London and the South-East, where the previous £1 million cap was often too low to cover even smaller farms. The higher allowance is expected to ease the succession of farm businesses, making it easier for families to pass them down to future generations without facing excessive inheritance tax bills.
Government forecasts indicate that around 85% of estates claiming agricultural property relief (and business property relief, where applicable) in 2026-27 will no longer be subject to inheritance tax, thanks to the increased thresholds.
Oscar Wingham commented, “This is a crucial change. In areas many areas across the South-East, the £1 million threshold meant that many farmers were at risk of large IHT liabilities on their estates. The combined £5 million allowance for spouses and civil partners will help preserve family-run farm businesses and ensure a smoother transition between generations.”
Oscar heads our tax department and provides advice on tax structuring, planning and compliance services to entrepreneurs and their businesses.
