Inheritance Tax Reform: Government Announces Welcome U-Turn
Just days before Christmas, the government announced a welcome change to its planned Inheritance Tax Reform. The update brought relief to many families, farmers, and business owners who were facing higher tax bills from April 2026.
On 23 December 2025, the government confirmed that it had reconsidered its earlier proposals. The changes relate to Agricultural Property Relief (APR) and Business Property Relief (BPR). These reliefs play a vital role in protecting family businesses and farms from excessive Inheritance Tax.
Increased Allowance for APR and BPR
Under the revised Inheritance Tax Reform plans, the allowance for 100% APR and BPR will increase from £1 million to £2.5 million.
This Inheritance Tax Reform is a significant improvement on the original proposal. It will apply from 6 April 2026.
The allowance will be refreshed every seven years for individuals. For trusts, the allowance will be refreshed every 10 years.
If the combined value of qualifying agricultural and business assets exceeds the allowance, the excess will still qualify for relief. However, the government will apply the relief at a reduced rate of 50%.
Transferable Allowance Between Spouses
This announcement follows an earlier positive change made in the Autumn Budget 2025. At that time, the government confirmed that the APR and BPR allowances would be transferable between spouses upon the first spouse’s death.
Together, these changes represent two significant improvements to the original 2024 announcement, which had caused widespread concern.
As a result of the updated Inheritance Tax Reform, couples will be able to claim up to £5 million of APR and BPR between them.
How This Fits with Other Inheritance Tax Allowances
The increased APR and BPR allowance sits alongside existing Inheritance Tax allowances.
These include:
- The Nil Rate Band of £325,000
- The Residence Nil Rate Band of £175,000
When combined, these allowances can significantly reduce or even remove an Inheritance Tax liability for many families.
What The Inheritance Tax Reform Means for You
Many individuals and families had already started planning for the original Inheritance Tax Reform proposals. For some, this involved complex restructuring or difficult decisions.
The revised rules may now change what is best for you and your family.
If you would like to discuss how these Inheritance Tax reforms affect your situation, professional advice is strongly recommended.
What Happens Next?
Further details are expected in January, when the changes are formally introduced in the Finance Bill 2025–26.
We will provide updates once more information is available and the final legislation is confirmed.
If you have concerns about Inheritance Tax Reform or would like to review your current plans, now is a good time to seek advice and ensure you are prepared.