The Budget 2026
Download our summary of the 2026 Budget, which contains all the key points you need to know, in one place.
Inheritance Tax Reform U-turn: Relief Threshold Raised to £2.5m for Business Owners
Change to Business and Agricultural Property Reliefs reduces risk for thousands of owner-managed estates
The Government has announced a major revision to its planned inheritance tax changes, increasing the threshold for both Business Property Relief (BPR) and Agricultural Property Relief (APR) from £1 million to £2.5 million, just in time for Christmas.
The move, which takes effect in April 2026, is expected to significantly reduce the number of estates affected and ease succession planning pressures for owner-managed businesses.
The move follows more than a year of pushback from across the business and rural communities, with growing concerns that the original proposals would penalise genuine trading businesses and discourage long-term investment.
Richard Grimster, Partner & Head of Tax at Price Bailey, commented:
“The news is very welcome for all owner managers and will take a level of future complexity and risk out of the estates of many; it would have been politically better to have made this announcement at the Budget last month, as it is a policy change to encourage growth and ambition to a greater extent. While the focus will immediately be on farming estates, major benefits of the revision will pass to owner managers in all sectors and simplify many estates where the assets are of a value lower than £5m. Care should still be taken when planning for the succession of family businesses, in our experience this new prospect of IHT is only one factor to consider.”
The announcement comes just before Christmas, almost a month after the Autumn Budget.
Gary Frear, Partner & Head of Equine at Price Bailey, added:
“Good news for family farms as the Government has watered down its proposal for the planned inheritance tax threshold by increasing it from £1m to £2.5m. I am sure some farmers will feel more inclined to celebrate this Christmas.
Just need wheat prices to increase and they may even treat themselves to a day off.”
While much of the public attention has been on agriculture, the revised reliefs will benefit a much wider pool of business owners, particularly those in capital-intensive sectors with valuable trading assets.
Comparision of BPR Allowance Growth from 2024 t0 2025
The allowance has grown since last year from £1m to £2.5m.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information on this page is intended as a general guide only. While we work to keep our content accurate and up to date, we cannot guarantee that it reflects the position at the time you are reading it. No responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm. For more information on our editorial process, click here.
We can help
Contact us today to find out more about how we can help you
Other tax insights
Founders' Relief: generous on paper, narrow in practice?
This article answers the questions business owners are asking: what is Founders' Relief, who may qualify, whether it makes up for the BADR cut, and what it means for family members who hold shares.
R&D tax relief changes
Read our Autumn Budget 2026 update for a breakdown of the planned changes to R&D claim requirements and what they could mean for your business.
Director’s loan or dividend? Choosing the better option for close companies
Explore whether a director’s loan or dividend is the better option for close company owners, including the key tax, commercial and legal considerations.