Farmers across the UK face a looming inheritance tax (IHT) “time-bomb” as major legislative changes come into effect on April 6, 2026. These changes, introduced in the Finance Act 2026, will impose new limits on Agricultural and Business Property Reliefs (APR and BPR), significantly altering how much relief can be claimed on farm and business assets passed down through generations.
Currently, farmers benefit from 100% relief on agricultural and business assets, effectively exempting qualifying properties from inheritance tax. However, starting from the 2026 tax year, this full relief will apply only up to £2.5 million per individual. Any qualifying assets above this threshold will only be eligible for 50% relief. The original proposal set the limit at £1 million, but extensive protests by farmers led the government to increase it.
Environment Secretary Emma Reynolds emphasized the government’s response to farmers’ concerns: “We have listened closely to farmers and adjusted the threshold to better protect ordinary family farms. Larger estates will contribute more, while supporting the farms and trading businesses that are vital to rural communities.”
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Despite this concession, uncertainty remains. The announcement of these restrictions in the 2024 budget came without clear detail, leaving many farmers scrambling to understand and respond. The new rules apply immediately to gifts made after the budget announcement, impacting farmers who might pass away after April 6, 2026, but within seven years of making a gift.
Rebecca Colmey, director of Tax Advisory, Farming and IHT at Azets, highlighted the challenges: “The legislation was unclear for months after its announcement, and when draft laws finally emerged in July 2025, they fell short of recommendations made by the House of Commons’ ‘Vision of Farming’ report. That report called for more generous relief for genuine farmers, rather than a blanket reduction that affects even those investing in agricultural land.”
Further adjustments in the 2025 budget included allowing unused relief allowances to be transferred between spouses. In December 2025, following farmer lobbying, the government raised the relief limit from £1 million to £2.5 million per individual, offering some reprieve.
Robert Anderson, Azets partner, conveyed the anxiety this uncertainty is causing farmers: “We speak with farmers weekly, and the stress is palpable. Many viable farms exceed the £2.5 million threshold. Older farmers, in particular, feel caught in a tough position—uncertain if living beyond April 5 means unfairly burdening their heirs. Many farms are asset-rich but cash-poor, meaning land sales might be needed to cover inheritance tax liabilities.”
Anderson added that planning solutions like trusts can help but aren’t a one-size-fits-all fix. “Each farm has unique circumstances, and navigating these changes requires expert financial and legal advice tailored to individual needs.”
The experts urge farmers not to delay action. “Ignoring the issue won’t make it disappear,” Colmey warned. “Farmers must assess how these rule changes affect their families and farms and begin planning immediately to minimize tax impacts.”
With less than three years remaining before the changes take hold, time is running out to implement effective inheritance tax strategies that protect family farms for future generations.