In a significant policy reversal, the government has announced an increase in the threshold for full Agricultural Property Relief (APR) and Business Property Relief (BPR) from £1 million to £2.5 million, effective from April 2026.
This move comes on the back of widespread protests from farmers and business owners, who argued that the original reforms would devastate family farms and enterprises. The decision, revealed on 23 December 2025, by HM Treasury, marks a partial U-turn on the inheritance tax (IHT) changes introduced in the October 2024 Budget.
Background: The Original Inheritance Tax Reforms
The original Budget, delivered by Chancellor Rachel Reeves, aimed to curb what the government regarded as excessive tax reliefs for wealthy landowners. Under those plans, 100% relief on qualifying agricultural and business assets would only have applied only up to £1 million per estate, with 50% relief (resulting in an effective 20% IHT rate) on values above that threshold. The reforms were projected to raise £520 million annually by targeting high-value estates, but they sparked immediate backlash. Farmers, in particular, warned of forced land sales, job losses in rural communities, and threats to food security. Mass demonstrations in London and tractor convoys highlighted the sector’s fury, with the National Farmers’ Union (NFU) labeling the policy a “family farm tax.”
Business groups echoed these concerns, arguing that the cap would hinder succession planning for family-run companies. The Confederation of British Industry (CBI) and the Federation of Small Businesses (FSB) lobbied intensely, emphasising that many mid-sized enterprises, not just the ultra-wealthy, would be hit. Critics pointed out that while only a small percentage of estates pay IHT overall, the changes disproportionately affected asset-rich but cash-poor sectors like agriculture.
The New Rules: What Has Changed?
The government’s response has been to raise the 100% relief threshold to £2.5 million, allowing spouses or civil partners to effectively pass on up to £5 million tax-free when combining allowances. Above £2.5 million, the 50% relief still applies. This adjustment is expected to exempt around 75% of previously affected farms and businesses, significantly reducing the policy’s impact. Treasury officials estimate the revenue loss at £200-300 million per year compared to the original plan but now say that it strikes a fairer balance between fiscal responsibility and protecting vital industries.
Reactions have been mixed. The NFU welcomed the change as a “vital reprieve,” with President Tom Bradshaw stating it would safeguard thousands of family farms from breakup. However, some critics, including opposition MPs, argue that it is insufficient and calling for a full scrapping of the reforms. Shadow Chancellor Jeremy Hunt accused Labour of “botched policymaking” that caused unnecessary distress.
This U-turn underscores the political sensitivity of rural and business issues and, one might add, the problem with governments taking an ideological approach to taxation rather than a purely fiscal one. As the Finance Bill progresses through Parliament, further amendments may emerge. For now, the adjustment provides breathing room for affected sectors, but the debate over fair taxation of wealth continues. With IHT receipts already at record highs due to frozen thresholds and rising asset values, the government faces ongoing pressure to reform the system holistically.
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