Households with agricultural property will be able to transfer up to £2 million without incurring inheritance tax under recently announced changes.
The adjustment, set to take effect from April, was confirmed by Chancellor Rachel Reeves following calls from farming and rural communities for relief. The move allows farmers and small business owners in a marriage or civil partnership, or with deceased spouses, to combine their inheritance tax allowances.
The change is intended to facilitate generational succession in the agricultural sector and address longstanding concerns about the burden of inheritance tax on family-owned farmland.
Background to the inheritance tax changes
Inheritance tax has historically been a major issue for farming families, who often face large liabilities when agricultural land and business assets are passed to the next generation. The standard inheritance tax allowance, or nil-rate band, has been set at £325,000 per individual.
However, agricultural property and certain businesses have qualified for reliefs, which have continued to evolve in recent decades. Calls for reform intensified in recent years, as changes in property values and fluctuations in farm income increased concerns about the future sustainability of family holdings.
Details of the new rules for farmers and business owners
Under the revised rules, couples in marriage or civil partnership, or those with deceased spouses, can each benefit from a full inheritance tax relief allowance of up to £1 million for agricultural property and eligible business assets. If one partner dies without using their full allowance, it can be transferred to the surviving partner.
As a result, up to £2 million could be passed to children or other heirs free of inheritance tax, provided the assets qualify under the revised criteria. The measure is designed to minimise the necessity for complex, long-term tax planning in family-run agricultural businesses.
Government response and motivation for reform
Chancellor Rachel Reeves said the new policy was devised following close dialogue with the farming community.
According to officials, the government’s objective is to guarantee that family farms and small, rural businesses do not have to be broken up to meet inheritance tax obligations. Reeves emphasised the administration’s commitment 'to supporting rural communities and securing their long-term future'.
Reactions from the agricultural community
Feedback from the agricultural sector has been mixed. David Gunn, a farmer and agricultural contractor in Kent, shared criticism, saying that he believed the government had not provided sufficient support for farmers as previously pledged.
His comments reflect an ongoing sentiment among some rural stakeholders who contend that policy changes have not fully resolved the challenges faced by farming families.
Expert commentary on the policy update
Tax specialist Dan Neidle described the chancellor’s reforms as a 'sensible change', noting that the measures allow farmers to avoid highly complex and costly tax planning arrangements.
Neidle contends that the policy update will remove a significant burden from the agricultural sector by providing greater certainty for succession planning and supporting longer-term investment in family businesses.
Final Summary
The government’s move to relax inheritance tax rules for agricultural property marks a significant development for farming families in the UK, potentially enabling them to transfer up to £2 million in assets tax-free.
While regarded as a step forward in addressing succession challenges, the policy has not fully extinguished concerns within the sector, particularly among those affected by remaining burdens.
The effectiveness of the measures may hinge on future adjustments and the government’s continued attention to rural communities’ needs. For those seeking up-to-date analysis on tax policy changes, the Pie app offers the latest insights.
