No Government ‘U’ turn On Inheritance Tax for Farmers and Landowners

2nd Dec 2025

Author: Butcher & Barlow

After months of concern and speculation, the Chancellor’s Autumn Budget on Wednesday 26 November 2025 has confirmed that the controversial changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) will go ahead as planned from 6 April 2026.

Despite a year of lobbying by the National Farmers’ Union (NFU), the Country Land and Business Association (CLA) and others, there has been no reversal of the policy that has quickly become known as the “family farm tax”. The only movement is a limited concession on how the new relief can be shared between spouses and civil partners.

Many of the key numbers were already known. Some of the background was even visible before the speech, after the Office for Budget Responsibility (OBR) accidentally published its forecast earlier in the day. What farmers and landowners were hoping for was a change of direction. That has not happened.

What is changing from April 2026?

Under the current rules, APR and BPR can provide up to 100% relief from inheritance tax on qualifying business and agricultural assets, with no upper monetary limit.

From 6 April 2026, that changes fundamentally:

• A new £1 million allowance will apply to the combined value of assets that qualify for 100% APR or 100% BPR in an estate.
• Above that £1 million allowance, qualifying assets will receive only 50% relief. In practice, this means an effective inheritance tax rate of up to 20% (half of the usual 40%) on the value of APR/BPR assets above the allowance.
• The option to pay inheritance tax on these farming and business assets in 10 equal annual instalments, interest free, will be extended to all property that qualifies for APR or BPR.

These changes apply on top of the existing inheritance tax nil-rate band of £325,000 per person.

The Budget 2025 concession – transferable £1 million allowance

The one piece of “good” news in the Budget for farming families is a technical but important adjustment.

Previously, the £1 million APR/BPR allowance was to be strictly per person and not transferable. Budget 2025 changes this. Any unused part of an individual’s £1 million allowance can now be transferred to a surviving spouse or civil partner, in the same way as the ordinary nil-rate band.

Key points are:

• The allowance is still £1 million per individual for assets qualifying for 100% APR/BPR.
• If the first spouse or civil partner dies on or after 6 April 2026 without using all of that £1 million allowance, the unused balance can be transferred to the survivor.
• If the first death was before 6 April 2026, it is assumed that the full £1 million allowance is available to transfer to the surviving spouse or civil partner.

In simple terms, a useful rule of thumb is that, depending on circumstances, a married couple or civil partners with farmland may still be able to pass on up to around £2.65 million without inheritance tax. That figure is made up of the combined £650,000 nil rate bands and two lots of the new £1 million APR/BPR allowance. The additional residence nil rate band for the family home may be available in some cases, but it starts to be withdrawn once the estate is worth more than £2 million and is often fully lost on larger farms and estates.

For many family farms, however, land, farmhouse, buildings and diversified businesses together can easily exceed these levels, especially in higher value areas. Any value of qualifying assets above the allowance is still exposed to inheritance tax at an effective rate of up to 20 per cent, for the first time in a generation.

Why the pressure on farms is still growing

The inheritance tax reforms are landing on a sector that is already under strain. Office for National Statistics data, reported earlier this year, showed a record 6,365 agriculture, forestry and fishing businesses closed in the past year, the highest number since quarterly records began in 2017. Many of those closures occurred after the original announcement of the APR/BPR changes in October 2024.

At the same time, the Autumn Budget confirmed wider measures that increase costs for rural businesses, including:

• Further freezes to income tax thresholds until 2030–31, dragging more workers and business owners into higher rates through “fiscal drag”.
• A 4.1% increase in the National Living Wage from April 2026, taking the rate for over-21s to £12.71 per hour, with larger percentage rises for younger workers.
• Higher tax rates on dividend, property and savings income, which will particularly affect farming businesses that trade through companies or that have diversified into let property.

NFU and other industry leaders have already said that the small inheritance tax concession announced this week is “nowhere near enough” to protect many family farms, and that the broader package of tax rises will “hit farming and growing businesses hard”

What should farmers and landowners do now?

Given this direction of travel, it now looks highly unlikely that the Government will abandon the APR/BPR reforms before April 2026. For farmers and landowners, leaving matters to chance is no longer an option.

In our view, there are four immediate priorities:

1. Understand your exposure
   • Obtain realistic up-to-date valuations of land, buildings, machinery, diversified enterprises and non-farming assets.
   • Ask your professional advisers to model your likely inheritance tax position under the new rules, including how the £1 million APR/BPR allowance, nil-rate bands and residence nil-rate band interact in your particular situation.
2. Review your business structure
   • Check how the farm is owned and operated – for example, in personal names, a partnership or a company – and whether that structure still works in light of the new inheritance tax regime.
   • Make sure that partnership agreements, shareholder agreements and any farming company arrangements match what you and your family want to happen on retirement, ill-health or death.
3. Plan succession, not just tax
   • Decide who is realistically going to farm or manage the land in the next generation and how ownership and control should pass to them.
   • Consider whether lifetime transfers, trusts, insurance or other planning tools might help manage the future tax bill and provide fairness between farming and non-farming children.
4. Build the tax changes into your wider business plan
   • Factor higher labour costs, frozen tax thresholds and potential inheritance tax liabilities into your medium- and long-term budgeting.
   • Think about how any future tax bill would actually be paid in practice, even if instalments are used, and what that means for borrowing, diversification or potential land sales.

How can Butcher & Barlow assist?

At Butcher & Barlow, we are already working with farming families to review their inheritance tax exposure and succession plans in light of these changes. Our Agricultural and Wills, Trusts and Estates Teams will take the time to understand your family, your business and your long-term aims so that decisions about the future of the farm are genuinely shared.

If you would like to talk through how the inheritance tax changes may affect your farm or estate, please get in touch with our team for tailored advice.

 

 

The information in this article was correct at the time of publication. The information is for general guidance only. Laws and regulations may change, and the applicability of legal principles can vary based on individual circumstances. Therefore, this content should not be construed as legal advice. We recommend that you consult with a qualified legal professional to obtain advice tailored to your specific situation. For personalised guidance, please contact us directly.