Farm Inheritance Tax and the 2026 Reforms
Written and reviewed by the Agricultural Accountants editorial team. Last reviewed 27 July 2026.
This is the change that put tractors outside Parliament. For decades a working farm passed down largely free of inheritance tax, because Agricultural Property Relief and Business Property Relief covered it at 100%. The 2024 Budget proposed capping that, and after a year of protest the cap was raised. A lot of what you will read online still describes the wrong figure.
Here is the current position, which is now law and takes effect on 6 April 2026.
The Allowance Is £2.5 Million, Not £1 Million
The Autumn 2024 Budget proposed capping 100% relief at £1 million of combined agricultural and business property. On 23 December 2025 that allowance was raised to £2.5 million per person, with 50% relief on qualifying value above it. The GOV.UK changes paper sets it out, and it is now law in the Finance Act 2026.
The unused allowance transfers to a surviving spouse or civil partner, so a couple can pass on up to £5 million in qualifying farm and business assets between them, and up to £5.65 million once their nil-rate bands are added. Above the allowance, 50% relief means an effective inheritance-tax rate of 20%, not the standard 40%.
How APR and BPR Actually Work
Agricultural Property Relief applies to the agricultural value of farmland and buildings, which is the value as if the land could only be farmed, not the amenity or development value. You need to have farmed it yourself for two years, or owned it let for seven. Business Property Relief covers the trading business and its assets on a two-year ownership test. The two interact, and the new £2.5 million allowance is shared across both.
The farmhouse is the usual sticking point: it only qualifies for APR if it is "of a character appropriate" to the land it sits with, a test HMRC sets out in its inheritance tax manual. Whether your farm is over the allowance at all often turns on how the farmhouse and the let land are valued.
What It Means for Succession
The practical questions are whether there is a bill, how big it is, and how to meet it without selling land. Gifting the farm and surviving seven years takes it out of the estate, but there are trade-offs around control, capital gains and giving up the income. The planning is covered in our guide to Business Property Relief and done as an engagement in our succession and IHT service.
One thing we do not do is tell you to insure the bill or what to invest in. That is regulated financial advice. We do the tax: the relief, the valuation position, the gifting and the claim.