HM Revenue and Customs (HMRC) has unveiled a significant new concession on inheritance tax (IHT) for business and farm owners, just months before major reforms are set to take effect.
What is the New Inheritance Tax Change?
The Government has announced it will increase the nil-rate band for qualifying business and farming assets from £1 million to £2.5 million per person. This change, confirmed on 23 December 2025, will be effective from 6 April 2026.
This marks the second major amendment to the original IHT proposals first outlined in the Labour Government's 2024 Budget. The move is designed to alleviate concerns that the new rules would force the breakup of family-run enterprises to cover tax bills.
Relief and Frustration from the Business Community
Tax experts have welcomed the increased allowance but criticised the Government's handling of the rollout. Paul Townson, a tax partner at BDO, stated that while the increase is sensible, the incremental announcement process has caused unnecessary stress.
"Many of our business and farming clients have been hugely concerned," Townson said. "Some have already been forced into changing succession plans, an effort that may now prove to have been unnecessary."
He called for a 10-year moratorium on further IHT tightening once the new rules are implemented to provide certainty for families planning their futures.
Mixed Reactions from Farming and Financial Advisers
The announcement has been met with a mixture of relief and criticism from industry representatives. Colin Low, Managing Director at Kingsfleet in Ipswich, described the move as a "U-turn" that proves previous proposals were unfair.
"Farming families have based entire business plans on succession involving no IHT," Low explained. "In the last year, many have incurred significant legal costs restructuring their affairs. Will the Government now refund those costs?"
Sean McCann, a chartered financial planner at NFU Mutual, highlighted the practical impact. "This will allow up to £5 million in qualifying assets to be passed on free of IHT for married couples, taking many smaller farms out of the tax net," he said.
However, McCann warned that challenges remain. "Farm asset values are high, but returns are often low. We could still see land sold on death to pay tax, leaving the next generation with smaller, less efficient farms."
Looking Ahead to April 2026
The latest concession provides clearer parameters for family business owners as the April 2026 deadline approaches. The combined effect of the increased nil-rate band and the ability for spouses to transfer unused allowances offers substantial protection.
Nevertheless, the protracted and piecemeal nature of the policy announcements has left many in the agricultural and business sectors calling for greater stability and long-term planning assurance from the Government.
