Inheritance tax threshold increase announced
Welcome news for the rural sector and family businesses
In a surprise announcement just before Christmas, the Government confirmed a significant change to the upcoming inheritance tax (IHT) reforms. The threshold for 100% IHT relief on qualifying business and agricultural assets – originally to be set at £1 million per individual – will now be raised to £2.5 million from April 2026.
This means spouses or civil partners can pass on up to £5 million of qualifying assets between them, providing a major boost for families, business owners, and farmers planning for succession.
Why the change?
The increase follows sustained pressure from the farming community and rural business groups, who warned that the original £1 million cap would have placed significant strain on family farms and agricultural enterprises. The revised threshold is widely seen as a positive step in supporting long-term business succession planning and protecting the viability of rural and family businesses.
This is a sensible approach which provides a more meaningful relief for those affected, many of whom have been worried about the potential impact of the changes as originally announced.
What does this mean?
- Greater relief: The increase offers substantial protection for family wealth, reducing exposure to IHT liabilities that can claim up to 40% of an estate.
- Planning opportunities: With higher thresholds, there is more scope to transfer business and agricultural assets efficiently – but timing remains critical.
- Deadline still applies: The new rules take effect from 6 April 2026, so early action is essential to maximise benefits and avoid delays.
- Early planners: Those who have already taken steps based on the original £1 million threshold are in a strong position. Their proactive planning secures relief, while the higher threshold now offers even more flexibility for future arrangements.
You could still be impacted
Despite the increase, many estates will still exceed the IHT threshold due to rising property values, investments, and pension pots. Proactive planning remains key to safeguarding wealth.
We’re here to help
Our specialist tax advisers are ready to help you review your estate, explore trust and gifting strategies, and plan for succession under the updated tax system.
To discuss your specific circumstances and how to optimise your position, contact us via the form below.
