Confirmation of £2.5m IHT relief threshold for farmers and businesses
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In our briefing on 23 December 2025, we reported that the government had unexpectedly increased the proposed new £1m allowance to £2.5m for transfers of agricultural and business property from 6 April 2026.
It was not clear before Christmas whether this announcement would extend to qualifying property held in trust as well as personal ownership. But amendments to the Finance Bill published yesterday, (5 January 2026), confirm inheritance tax charges on ‘relevant property’ trusts can also benefit from 100% relief on up to £2.5m of agricultural and business property from 6 April. This alignment makes sense because the trustee allowance available to new trusts made on or after 30 October 2024 will be linked to the amount transferred from the individual making the trust.
The increased threshold is very welcome. It may take smaller farming and business operations outside the scope of inheritance tax altogether, especially where a combination of family and trust ownership is possible. With good planning, a married couple or civil partners can together arrange for £10m or more of value to be outside IHT.
However, planning in this area is not straightforward. If your business is worth more than £2.5m and you are concerned about the impact of inheritance tax at 20% or possibly 40% on the succession of your business, Boodle Hatfield offers a succession IHT health check service, so please contact us.
