These changes represent a significant shift from previous announcements, as they increase the value of qualifying assets that can benefit from 100% Agricultural Property Relief and Business Property Relief.
The updated rules allow up to £2.5 million of qualifying agricultural and business assets to receive full IHT relief at 100%. This represents a significant increase from the previously proposed £1 million cap and reflects concerns raised by farming and business groups about the potential impact of earlier proposals.
Where the value of qualifying assets exceed £2.5 million, relief will remain available but at a reduced rate of 50%. This results in an effective IHT charge of 20% on the excess value, compared with the standard rate of 40%.
A largely campaigned and welcome change in the 2025 Autumn Budget also declared married couples and civil partners can transfer unused reliefs and allowances. As a result, up to £5 million of qualifying agricultural and business assets may be transferred between spouses without any tax consequences. In addition, when both spouses’ standard nil rate bands (NRB) of £325,000 are considered, a married couple could have no IHT liability on assets with a combined value of up to £5.65 million. It is important to note this would be dependent on the nature and structure of the estate which we can assist you calculating.
The NRB remains at £325,000 per individual, while the residence nil rate band (RNRB) continues at £175,000 where a main residence is passed to direct descendants, although this RNRB is still subject to tapering for larger estates exceeding £2m. These thresholds are frozen until at least April 2030as portrayed on the new budget, and the standard rate of IHT has not changed, remaining at 40%.
The increase to £2.5 million, significantly reduces the number of family farms and businesses likely to face Inheritance Tax charges and provides greater certainty for long-term succession and estate planning.
It is highly important that individuals with agricultural or business assets approaching these levels review their arrangements ahead of April 2026 to ensure the appropriate planning is in place.
At ETC Tax, we have advised numerous individuals and businesses on their IHT affairs, helping many families plan for their future and are well placed to manage this process. Should you require any assistance, please do not hesitate to get in touch.
