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Introduction
In a significant policy reversal announced just before Christmas 2025, the UK government has increased the inheritance tax relief threshold for agricultural and business assets from £1 million to £2.5 million. This change, coming into effect from 6 April 2026, means married couples can now pass on up to £5 million in qualifying assets tax-free.
The move follows intense pressure from farmers and business owners after the original proposals announced at Budget 2024 sparked widespread concern across rural communities and family businesses throughout Bolton, Manchester and the wider UK.
Here's what this major change means for your family farm or business, and why proper planning remains essential despite this welcome relief.
What's Changed?
Original Proposal (Budget 2024)
From April 2026, 100% inheritance tax relief on agricultural and business property would be restricted to the first £1 million of qualifying assets, with only 50% relief on amounts above that threshold.
New Position (December 2025)
The government has increased the 100% relief threshold from £1 million to £2.5 million per estate, with 50% relief continuing to apply to qualifying assets above that level.
What This Means in Practice
For individuals: You can pass on up to £2.825 million tax-free (£2.5m agricultural/business property relief + £325,000 standard nil-rate band).
For married couples: A surviving spouse or civil partner can now pass on up to £5 million of qualifying agricultural and business assets tax-free, on top of existing nil-rate bands. This brings the total tax-free allowance for a couple to £5.65 million.
Important: This will apply to people who are widowed and have lost spouses or civil partners before the policy was introduced.
Why the Government Changed Course
The original £1 million threshold announced at Budget 2024 sparked an immediate backlash. Farmers descended on Westminster, rural Labour MPs lobbied intensely, and family businesses warned the changes would force premature business transfers and job losses.
According to a CBI Economics survey for Family Business UK, nearly a quarter of family businesses, and 17% of family farms, were already cutting jobs or pausing recruitment in response to the original proposals.
Environment Secretary Emma Reynolds stated: "Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming."
The National Farmers' Union (NFU) welcomed the change, with one representative noting that "from the start the government said it was trying to protect the family farm and the change announced today brings this much closer to reality for many."
The Impact: Fewer Families Affected
The increase in the threshold dramatically reduces the number of families facing higher inheritance tax bills.
The Numbers
The number of estates claiming agricultural property relief (including those also claiming business property relief) affected by the reforms in 2026-27 will fall from 375 to 185.
Overall, the reforms are now expected to result in up to 1,100 estates across the UK paying more inheritance tax in 2026-27. This is a reduction from around 2,000 estates forecast to pay more at Autumn Budget 2024.
Importantly, around 85% of estates claiming agricultural property relief in 2026-27, including those that also claim for business property relief, are forecast to pay no more inheritance tax on their estates.
Real Examples: How Families Are Protected
Defra and HM Treasury have provided practical examples showing how farming families will be affected:
Example 1: Farm Owned by a Married Couple
A farm owned by one or both members of a couple can be passed on tax-free up to £5.65 million.
This is made up of:
- £650,000 (combining two standard £325,000 nil-rate bands)
- £5 million (£2.5 million tax-free allowance for each partner's agricultural assets)
Example 2: Farm Owned by One Person
An individual who owns a farm can pass on land and property valued up to £2.825 million tax-free.
This comprises:
- £325,000 (standard nil-rate band)
- £2.5 million (agricultural property relief allowance)
Example 3: Business Property Relief
The same principles apply to business owners. Bolton and Manchester family businesses can benefit from identical reliefs when passing on qualifying business assets.
What Assets Qualify for Relief?
Agricultural Property Relief (APR)
- Farmland and buildings
- Farmhouses (where occupied for agricultural purposes)
- Growing crops
- Stud farms (in certain circumstances)
- Agricultural shares and securities
Business Property Relief (BPR)
- Trading businesses and assets
- Shares in unquoted companies
- Business property and machinery
- Goodwill and intellectual property
Both reliefs have specific qualification criteria. Properties must have been owned for at least two years, and the business or farm must be actively trading.
Why Planning Still Matters
Despite this welcome increase, inheritance tax planning remains crucial for Bolton and Manchester families with farms or businesses.
Key Reasons to Plan Ahead
1. Assets Above £2.5m Still Face Tax Once your estate exceeds £2.5 million, you'll pay inheritance tax at an effective rate of 20% (50% relief on the standard 40% rate) on the excess.
2. Seven-Year Rule Still Applies Gifts made more than seven years before death remain fully outside inheritance tax scope. This remains a powerful planning tool for larger estates.
3. Business Structure Matters The way you structure your farm or business ownership affects qualification for these reliefs. Professional advice ensures you maximise available allowances.
4. Succession Planning is Complex There is a serious risk that business owners were forced into these transfers by the changes to IHT to the potential detriment of those businesses going forward. Proper succession planning ensures the next generation is ready when they take over.
What Bolton & Manchester Families Should Do Now
1. Review Your Estate Valuation
Get a professional valuation of your farm or business assets. Many families are surprised by current values, especially with rising land prices in Greater Manchester.
2. Check Your Business Structure
Ensure your business qualifies for relief and that ownership is structured optimally between spouses or civil partners.
3. Consider Lifetime Gifting
For estates significantly above £2.5 million, lifetime gifts (with the seven-year rule) remain valuable planning tools.
4. Update Your Will
Make sure your will reflects current values and takes advantage of transferable allowances between spouses.
5. Get Professional Advice
Inheritance tax planning is complex. Working with specialist accountants like YRF ensures you don't leave money on the table or make costly mistakes.
The Bigger Picture: What This Policy Reversal Means
This represents the second major concession on inheritance tax changes since Budget 2024. First, the government made the allowance transferable between spouses at Budget 2025. Now, they've increased the threshold itself to £2.5 million.
Mark Lance, CEO of Moore UK, noted: "The problem with today's concession is that it may have come too late for many UK businesses and farmers" who had already begun transferring assets to avoid the originally proposed changes.
The House of Commons Library briefing on these changes shows the intense parliamentary scrutiny these proposals faced, with the government eventually responding to sustained pressure from rural MPs and farming organisations.
Concerned about inheritance tax on your farm or business?
Don't leave planning to the last minute. Contact YRF Accountants in Bolton today for expert guidance on protecting your family's legacy.
📞 01204 938696 | 📧 info@yrfaccountants.com