A welcome rethink on inheritance tax for farmers and business owners.
Over the last year, inheritance tax has become a growing concern for farmers and business owners. Plans announced in 2024 signalled a significant shift, with reliefs that many families have relied on for generations set to be reduced from April 2026.
When this year’s Autumn Budget passed without change, it looked as though those reforms were firmly locked in. However, following strong feedback from the rural and business community, the government has now announced a change of direction. The thresholds at which inheritance tax becomes chargeable are increasing, offering some welcome breathing space for family businesses and farms. While this is positive news, it does not remove the need for careful planning, and understanding how the new rules work will still be important for many owners.
What has changed?
Under proposals confirmed in 2024, agricultural and business assets worth more than £1 million were due to face an effective 20% inheritance tax charge from April 2026. This caused understandable concern, particularly among farming families and owner-managed businesses where wealth is often tied up in land or trading assets rather than cash. The government has now confirmed that the threshold for full inheritance tax relief will increase to £2.5 million per person. For married couples or civil partners, this could mean up to £5 million of qualifying agricultural or business assets passing to the next generation without inheritance tax on those assets. The change will be introduced through an amendment to the Finance Bill.
What happens above £2.5 million?
While the higher threshold is welcome, it is important to understand that it is not a complete return to the old rules. Qualifying assets above the new £2.5 million threshold will still benefit from inheritance tax relief, but only at 50% rather than 100%. This means inheritance tax could still apply at an effective rate of 20% on the excess value. For some families, particularly those with larger estates or multiple business interests, this could still result in a significant tax bill.
What does this mean for Yorkshire business owners and farmers?
This announcement reduces the number of estates likely to be affected by the original reforms and provides greater certainty for many family-run businesses and farms across Yorkshire.
That said, inheritance tax planning is rarely one-size-fits-all. How these changes affect you will depend on:
- The value and type of assets you own
- How they are structured
- Whether assets are held personally, jointly or in trust
- Your wider succession and retirement plans
Even with higher thresholds, early and joined-up planning can make a real difference to long-term outcomes.
A sensible time to review your plans
With further changes still due from April 2026, now is a good time to review your inheritance tax position and make sure your plans remain fit for purpose. A clear understanding of the rules, and how they apply to your circumstances, can help you move forward with confidence.
If you would like to talk through what these changes could mean for you, a short conversation with a specialist adviser can often provide clarity and reassurance – our team is here to help.
