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Rachel Reeves had previously announced in the October 2024 Budget that the full Inheritance Tax (IHT) relief band for assets qualifying for Agricultural Property Relief (APR) and Business Property Relief (BPR) would be capped at £1 million per individual from 6^th April 2026. It was later announced in the November 2025 Budget that this would be transferrable between spouses, so an individual widowed before 6^th April 2026 could have up to £2 million in 100% IHT relief, provided the assets qualify for APR and/or BPR.

Shortly before Christmas, without much warning, the Government announced a further amendment to the full IHT relief band, stating that it would be increased to £2.5 million per individual. According to Prime Minister Sir Kier Starmer, this concession was intended as recognition that “family farms need to be protected”. For trusts, relief allowance will also increase from £1 million to £2.5 million. These changes were included in the amendments to the Finance Bill earlier this month.

The IHT Nil Rate Band has been capped until 2031 at £325,000 per person. This is also transferrable between spouses meaning a combined band of £5.65 million per couple, where properties attract relief under APR or BPR.

Whilst the increase in the threshold for IHT relief for assets qualifying for APR and BPR is welcome news, there is still tax planning required for those with property worth in excess of £5.65 million. Furthermore, we have seen a trend recently where the bands for tax reliefs are not increased with inflation, meaning more farms and estates are likely to fall outside the reliefs each year.

If you require advice regarding Inheritance Tax planning please do not hesitate to contact a member of the Rural team.