Government Makes Further Concessions on Inheritance Tax reforms for Farms and Firms

CREATED BY ROGER EDDOWES Published: 15/01/2026 @ 09:00AM #InheritanceTaxreforms #InheritanceTax #APR #BPR #EstatePlanning #FamilyBusiness

Here's the latest on Inheritance Tax reforms: the APR/BPR allowance is rising to £2.5m. That should narrow the impact to the biggest estates while keeping planning practical. Less cliff-edge, clearer options, and more time to prepare ...

Inheritance Tax reforms, Easing financial burden, Peace of mind for all

I'm pleased that the latest Inheritance Tax reforms have taken a more pragmatic turn, with the government confirming a higher allowance for 100% agricultural property relief and business property relief. From the 6th of April 2026, the new framework is designed to preserve the core idea of supporting working farms and trading businesses, while sharpening the focus on the very largest estates.

The key shift is the size of the allowance!

What was originally set to be £1m is now £2.5m, refreshing every seven years for individuals and every ten years for trusts. The mechanics matter because the relief does not simply disappear above the allowance; instead, where qualifying business and agricultural assets exceed the allowance, the excess is set to attract relief at 50%.

For many families, that 'tapered' outcome should feel more manageable than a sudden drop from full relief to none, and it reframes the IHT changes as a question of proportion rather than punishment.

This tax policy update also sits alongside earlier concessions, including the decision to make the allowance transferable between spouses and civil partners. In practice, that pushes the planning horizon outwards: couples may be able to shelter up to £5m of qualifying assets with 100% relief, before considering other familiar thresholds such as the nil rate band.

The government has also indicated that widowed people whose spouses or civil partners died before the new rules arrive should be able to benefit similarly, aligning the approach with how unused bands can already be carried across.

For both business owners and farming families, the
immediate benefit is clarity!

They now know their scale of exposure to Inheritance Tax, even if the details still need to land in legislation. A higher allowance can reduce the number of estates drawn into higher bills, while still meeting the government's stated intent that only the largest holdings face a meaningful change.

I feel that balance really matters because it protects continuity: land, machinery, trading companies and long-held family enterprises are rarely 'liquid', and the ability to plan around the relief level can be the difference between a structured transition and a rushed sale.

I feel that I do need to say that even with this optimistic direction of travel, sensible estate planning remains essential because timing and structure will still drive outcomes.

Families will want to track how the seven-year and ten-year refresh rules interact with gifting strategies, trust creation, and succession planning, especially where a mix of agricultural and trading assets sits alongside investment property or cash.

As the Finance Bill 2025–26 is updated, I'll be watching closely for HMRC guidance that clarifies valuation points, how the allowance applies across connected settlements, and what evidence will be expected to support APR and BPR claims.

Until next time ...

ROGER EDDOWES
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About Roger Eddowes ...
Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach. Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.

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