With the Budget approaching, the Chancellor may be softening her stance on inheritance tax for farm estates. Pre-Budget briefings suggest that smaller, family-owned farms could be removed from the new rules by increasing the proposed agricultural property relief thresholds. The current idea of a £1 million IHT threshold per individual and £2m for married and civil-partnered couples is reportedly under review.
Officials are considering a higher cap of £5m per person. The total relief could be greater once the nil-rate band, standard IHT allowances, and marital status are factored in. Another option under discussion is a minimum share rule that grants relief up to £5m per person, therefore up to £10m for couples.
These ideas shift from the firm line taken since Rachel Reeves first announced the reforms at the autumn 2024 Budget. Despite months of consultations and lobbying, Treasury ministers had repeatedly ruled out changes. Under the current plans, tighter APR rules are forecast to raise about £1.6 billion by the end of the Parliament in 2029, although the figures on how many farmers would be affected remain contested.
How the proposed relief might work
Two features stand out. First, the bigger headline threshold, potentially £5m per individual, would lift many smaller family farms out of scope. Second, a minimum share rule could focus the relief on those holding a significant ownership stake in a farming business, making it harder to claim relief on passive or marginal interests.
Agricultural IHT would be charged at 20% with a 10-year repayment window. That contrasts with standard IHT, which is 40% above the threshold and has only six months to pay. The structure is designed to ease cashflow pressures where land and working assets dominate a family’s wealth.
The movement signals follow months of demonstrations and campaigning against what many in the sector view as a poorly targeted tax. Farmers have marched on Parliament and staged protests from Leeds to Cirencester and along the south coast. The Treasury remains tight-lipped ahead of the Budget on Wednesday, November 26, at 12.30, and it will not comment on fiscal policy in advance. Reports suggest a funding gap of roughly £30bn, which limits room for giveaways.
If the farm IHT threshold were raised to £5m per person, the Government would still need to collect the same overall revenue. Recent decisions underline that constraint, including changes to winter fuel payments that now affect only pensioners with incomes above £35,000. Any concession on APR would likely be balanced by revenue from elsewhere or tighter targeting within the relief.
Tax advisers warn that bigger operations could feel the squeeze if thresholds rise for smaller farms, but relief tightens elsewhere. Structures, ownership shares, and partnership agreements will matter more, so owners should review how land, business assets, and development prospects are held.
What to watch next
All eyes now turn to the Budget. Key tests will include whether any higher APR threshold is coupled with stricter eligibility, whether a minimum share rule is adopted, and how transitional rules apply to existing structures and ongoing succession plans. Farmers should prepare contingency plans, model different outcomes, and document the commercial rationale for ownership and operational decisions.
While a higher threshold would be welcome for many smaller family farms, the details will decide who benefits, who pays more, and how succession plans should evolve until the Chancellor confirms the final package.
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