Labour raises IHT threshold for farms and property – Daily Business

Labour has made another concession to its tax plans after announcing that the agricultural and business property reliefs threshold will be increased from £1m to £2.5m from April.

More than doubling the threshold is seen as a significant change and follows sustained protests by the farming community, including noisy demonstrations outside the Commons.

The new allowance allows spouses or civil partners to pass on up to £5m in qualifying agricultural or business assets between them before paying inheritance tax, on top of existing allowances. 

In a statement, the government said it is “maintaining the core principle that the most valuable agricultural and business assets should not receive unlimited relief.”

However, raising the threshold will significantly reduce the number of farms and business owners facing higher inheritance tax bills under the reforms, ensuring that only the largest estates are affected. 

It will reduce the number of affected estates claiming Agricultural Property Relief (including those also claiming Business Property Relief) from 375 to 185.  About 85% of estates claiming agricultural property relief in 2026-27, including those that also claim for business property relief, are forecast to pay no more inheritance tax on their estates. 

Environment Secretary Emma Reynolds said:  “Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming.  

“We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms.

“It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities.

Head of the National Farmers’ Union Tom Bradshaw welcomed the change, saying it “takes out many family farms from the eye of a pernicious storm”.

Andrew Tully, technical services director at Nucleus, said: “This is a very helpful move for those who intend to pass on business or agricultural assets to family.

“Raising the threshold will significantly reduce the number of farms and business owners facing higher inheritance tax bills under the reforms, ensuring that only the largest estates are affected.”