Changes to inheritance tax – agricultural property relief and business property relief

What changes will be made to inheritance tax reliefs?

The Chancellor announced in the November 2024 Budget that major inheritance tax changes would apply to gifts of assets that qualify for business relief and in relation to agricultural property. Before the 2025 Budget there were many instances where relief was available at 100%, which effectively removed farming and business assets from a charge to inheritance tax. Initially, 100% relief was to be capped at £1m per person, meaning that the value above this threshold would be subject to inheritance tax, albeit softened by the introduction of a reduced rate at 50%.

However, following a government announcement in late 2025, the cap for 100% relief will now be £2.5 million per person and will also be transferrable between spouses and civil partners on death – meaning that they will be able to pass on up to £5m in qualifying agricultural or business assets between them. The £2.5 million relief will refresh every 7 years, increasing the scope for making significant gifts in the future.

While the raising of the cap will be a welcome change for many, the introduction of a cap will still require a lot of thought and careful tax planning for many. Our advice to business owners is to undertake tax planning at an early stage to make sure everything has been considered.

How much inheritance tax will be payable under the new allowances?

Gifts of qualifying assets above the £2.5m caps will be subject to 50% relief from inheritance tax.

As the revised £2.5m allowances will now be transferable between spouses, someone whose husband, wife or civil parter passes away will be able to pass on up to £5m of qualifying assets without inheritance tax being payable on them – on top of existing allowances, such as the nil-rate band.

What qualifies for business property relief?

To qualify for business property relief, a business must normally have been owned for at least two years by the person whose estate it forms part of. The business must be trading – it can’t be in liquidation or subject to a binding contract for sale.

Agricultural inheritance tax relief – what qualifies for agricultural property relief?

Land which has been used to grow crops or rear animals qualifies for Agricultural Property Relief, but some agricultural property does not, such as derelict farm buildings.

If you’re looking for advice on inheritance tax, we’re here to help

At Prime Accountants Group, we are experts in changes to inheritance tax, agricultural property relief and business property relief, and we’re here to help advise business owners on how the changes will impact their estate.

If you’re a business owner, contact us to see how we can help you with your inheritance tax planning.