Recent IHT changes affect not only farms but also many family-owned trading businesses. Reviewing your estate now can help protect your assets and ensure relief is claimed where available.
New thresholds for relief
The Government has reversed plans to impose inheritance tax (IHT) on farms worth more than £1 million. When the new rules come into law in April, the threshold for Agricultural and Business Property Relief will be set at £2.5 million for individuals and £5 million for married couples. Assets above this level will receive 50% relief.
(For the purposes of IHT, an “estate” means all the assets a person owns when they die – including property, savings, investments, and qualifying business interests).
Who else is affected?
While the headlines focus on farms, the changes are also relevant to family-owned trading businesses of many kinds. Whether you run a shop, garage, small manufacturing or other trading enterprise, Business Property Relief (BPR) may apply, provided the business is “wholly or mainly trading.” Farms are included, but they represent just one part of the picture.
Owners of non-agricultural businesses should also review their estate planning to ensure any available relief is being claimed.
Looking at the long-term prospects for your company, and your family’s financial security, there are still steps you can take now to mitigate some potentially damaging tax liabilities. A sudden and unexpectedly large IHT bill, particularly where liquid assets are in short supply, could spell the end for even a successful enterprise, and the jobs it provides.
Government perspective
The Government emphasizes that larger estates will still contribute, while the adjustments protect the backbone of Britain’s rural and small business communities. Rules for sharing allowances between spouses have also been clarified to include those who have been widowed or lost a civil partner before the policy was introduced.
Environment Secretary Emma Reynolds commented:
“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.”
“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.”
Projected impact
Government projections suggest that, under the updated rules, around 1,100 estates – in this context, a person’s total assets for IHT purposes – will be liable to tax from April 2026, compared with the 2,000 originally expected.
Why estate planning matters, for everyone
Changes like these highlight the importance of keeping estate plans up to date, not just for those with agricultural property, but for all owners of qualifying trading businesses. IHT remains one of the UK’s more complex wealth taxes, and even small changes in assets, ownership, or business structure can have significant implications.
Whether you own a farm, a family business, or other commercial property, it’s essential to ensure your estate (your total assets) is prepared for any potential IHT liabilities.
Sources
https://www.gov.uk/government/news/inheritance-tax-reliefs-threshold-to-rise-to-25m-for-farmers-and-businesses
https://www.gov.uk/business-relief-inheritance-tax/what-qualifies-for-business-relief
https://moneyweek.com/personal-finance/inheritance-tax/business-owners-consider-before-inheritance-tax-change
https://commonslibrary.parliament.uk/research-briefings/cbp-10181/
https://moneyweek.com/personal-finance/inheritance-tax/inheritance-tax-farmers-climbdown-agricultural-property-relief-threshold-raised