Farmers advised to re-examine IHT implications

The December 2025 revision of the proposed inheritance tax (IHT) relief changes for farms and businesses is an important catalyst for renewed analysis of business assets and succession planning.

In its October 2024 budget, the government initially levelled a threshold of £1m at which IHT would become payable but in December 2025 it announced this would increase to £2.5m.

It also agreed that the £2.5m relief could be transferred between spouses, which in 
effect protects £5m of assets.

These new Agricultural Property Relief (APR) and Business Property Relief (BPR) thresholds came into force in April 2026.

Any tax on inheritance above these relief allocations is payable at an effective rate of 20%, half 
the standard 40% rate at which IHT is otherwise levelled.

There are no changes to the mechanism which allows the gift of assets as Potentially Exempt Transfers (PETs), but where they are made between 30 October 2024 and 6 April 2026 and the donor dies before 5 April 2026, the full pre-October 2024 budget reliefs will apply. If the donor dies after 5 April 2026, the PET will be assessed in line with the new rules.

A 100% Holdover Relief against Capital Gains Tax on the gift of assets used in a trading business remains in place.

With these revisions, fresh analysis is needed to fully utilise the higher thresholds.

Brown&Co is supporting clients to establish who owns what property and business assets and what their market value is, analysing the structure of the business, and identifying all business and personal income and profit sources, including pensions and life cover.

During this process, consideration is given to the wishes and income needs of the business owners and family members, including whether future support for care may be needed and what provisions have been made in last wills and testaments.

This process allows a succession plan to be put in place, one that sets out future control of property and business assets and facilitates the orderly transfer of these in the most tax efficient manner.

Depending on outcomes sought by the client, Brown&Co can assist with property transfers, advise on agreements and business structures, draft a tenancy agreement and provide rental valuations.

Importantly, we will liaise with a client’s solicitor and accountant on these matters.

If a tax liability arises after the £2.5m or £5m relief is applied, Brown&Co can review options with clients.

For further advice on the implications of the current IHT changes, contact our Land Agents at your local Brown&Co office.