IHT assistance for agricultural and business assets

HMRC has confirmed changes to Inheritance Tax (IHT) relief for agricultural and business assets, which take effect from 6 April 2026.

This change represents a significant departure from previous announcements, as it increases the value of eligible assets that can benefit from 100% Agricultural Property Relief and Business Property Relief.

Significant improvement…

The updated rules allow up to £2.5m of qualifying farm and business assets to receive full IHT relief at 100%. This amount is a significant increase on the previously proposed £1 million cap and reflects concerns raised by farming and business groups about the potential impact of previous proposals.

If the value of eligible assets exceeds £2.5 million, relief will remain available but at a reduced rate of 50%. This results in an effective IHT charge of 20% on the excess value, compared to the standard rate of 40%.

A welcome change!

The largely campaigned for and welcomed change in the Autumn Budget 2025 also states that married couples and civil partners can transfer unused relief and benefits. As a result, up to £5 million of qualifying farming and business assets can be transferred between partners without any tax consequences. Additionally, when both partners’ standard nil rate band (NRB) is considered at £325,000, a married couple cannot have an IHT liability on assets with a combined value of up to £5.65 million. It is important to remember that this depends on the nature and structure of the estate which we can help you calculate.

Other aspects of Inheritance Tax remain unchanged

The NRB remains at £325,000 per individual, while the residential nil rate band (RNRB) continues at £175,000 if the main residence passes to a direct descendant, although this RNRB is still subject to reductions for larger estates exceeding £2 million. This threshold is frozen until at least April 2030 as outlined in the new budget, and the standard IHT rate is unchanged, remaining at 40%.

Greater certainty for long-term succession and legacy planning.

The increase to £2.5 million, significantly reduces the number of family farms and businesses likely to be subject to Inheritance Tax charges and provides greater certainty for long-term succession and estate planning.

Conclusion

It is vital that individuals with agricultural or business assets approaching these levels review their arrangements before April 2026 to ensure appropriate planning has been implemented.

The next step

At ETC Tax, we have advised many individuals and businesses on their IHT affairs, helped many families plan for their future and are well placed to manage this process. If you need help, don’t hesitate to contact us.