Festive cheer for farmers and business owners as Government increases APR and BPR 100% relief limit to £2.5m

It is worth a reminder of how we got here:

• as the rules stood, historically, there was no limit on the value of property which, if it qualified for 100% relief as agricultural or business property, could pass on death without incurring IHT;
• as part of the 2024 Budget, the Government announced that from 6th April 2026, there would be a limit to the 100% relief at £1m per person, and thereafter qualifying agricultural or business assets would be taxed to IHT at 50% of the normal rates (i.e. 20%);
• at the 2025 Budget, the Government made an important concession: that any unused allowances could be transferred between spouses, as happens with nil rate bands and residential nil rate bands, so that ultimately a couple could pass £2m worth of agricultural and/or business property on second death down to the next generation completely free of IHT (not including the value of their own nil rate bands, if available).

The 2025 Budget was announced on 26^th November, yet within a month, on 23rd December the Government then raised the 100% relief limit to £2.5m per person. Between spouses, that could mean £5m of agricultural or business property passing down a generation free of IHT on death.

Client action

Clients with agricultural and business property have been reviewing their succession and tax plans since the 2024 Budget. The changes from 2025 Budget and this 23^rd December announcement will call for a further look at such plans.

The latest changes might take more farmers or business owners outside the scope of IHT, but for others it will still leave them with structuring considerations, whether during lifetime or on death, both of which we can advise on.

Many farmers and business owners will have made lifetime gifts outright or into trusts earlier than they had envisaged as a result of the 2024 Budget changes. There will have been splintering of shareholdings, driven by tax planning rather than being in the best interests of the business. For some, the 2025 Budget and most recent 23rd December changes might mean they needn’t have done such planning. For others, recent changes will have helped.

Those who have not yet completed their planning will benefit from these further changes but must act urgently, given the changes come into effect from 6th April 2026.

Why such a surprise?

The Government’s timing was certainly a surprise.

The farming and business sectors undertook very powerful and determined lobbying straight after the 2024 Budget and maintained it right up to 2025 Budget. They were left disappointed when there was no change to the limit at that point.

Between November’s Budget and 23^rd December there was no change in underlying messages in the month to bring about the change. The Government’s 23^rd December press release referenced listening to the concerns of the farming community and businesses about the reforms and wanting to protect more farms and businesses from increased IHT. However, the Government stuck resolutely to the idea that the most valuable agricultural and business assets should not receive unlimited relief.

At a time of the year when our trollies were full of traditional Christmas fare, could the timing simply have been a minister paying special attention to where their turkey, potatoes, parsnips, sprouts and red cabbage had come from?

Pressure can change Government decisions

The Government press release would be seen as a very clear win for the farming lobby in particular.

The only quote came from the Environment Secretary Emma Reynolds MP, who referred to farmers being at the heart of food security and environmental stewardship. She said the change in policy backed “the farms and trading businesses that are the backbone of Britain’s rural communities”.

She mentioned other policies the Government are implementing to help farmers, including relaxing planning rules to help farmers expand their businesses and a commitment to establish a new Farming & Food Partnership Board bringing together leaders in farming, food production, retail and finance to strengthen food production.

Where do we go from here?

It is clear this Government will not do a full U-turn, going back to there being no limit on the amount of qualifying agricultural and business property benefitting from 100% relief.

Commentators still call for a full U-turn, with one viewing the introduction of a limit to the relief as ‘economic self-harm akin to imposing tariffs on your domestic industry’. The underlying policy reasons behind the reliefs remain valid: that farms and businesses should not have to be split on an arbitrary event like death to pay taxes when it would interfere with the public good they contribute to: food production, jobs, economic growth and the country’s overall tax take.  It is clear, (for the moment however), that this Government will not reinstate unlimited 100% agricultural and business property relief.

Farmers, business owners and their advisers now want a period of certainty. Whether or not we like it, we have to accept change and plan for it. But when there are changes to the change…

How we can help

At Wedlake Bell, we provide expert advice to help farmers, business owners and their advisers navigate these significant changes with confidence. Whether you need to revisit earlier planning or take advantage of the latest concessions, we are here to help you secure the best outcome for your family and business. For further information please contact the Private Client team.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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