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APR/BPR Inheritance Tax Threshold Raised to £2.5m
The Government’s unexpected announcement on 23 December 2025 that the IHT threshold for 100% Agricultural and Business Property Reliefs will rise from £1m to £2.5m will be welcome news to many farmers and businessowners. In addition to the Chancellor’s recent concession that allowances are to be transferable between spouses, this will enable married couples to protect trading businesses worth up to £5m from IHT.
2 minute read
Published 23 December 2025
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James Austen
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Henry Lopes
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The Government’s unexpected announcement on 23 December 2025 that the IHT threshold for 100% Agricultural and Business Property Reliefs will rise from £1m to £2.5m will be welcome news to many farmers and businessowners. In addition to the Chancellor’s recent concession that allowances are to be transferable between spouses, this will enable married couples to protect trading businesses worth up to £5m from IHT.
Watering down the Government’s original plans in this way is a promising direction of travel for this troubled policy and the changes will be appreciated – as far as they go. However, minor tweaks of this sort fail to address more fundamental concerns. An interest in any private business is an inherently illiquid asset, and IHT charges for those still caught by the new regime will continue to prove unaffordable for many. Distressed sales (if they are even possible) will therefore be the only way for affected families to meet the new liabilities.
The Government’s modifications still fail to appreciate the policy motivation for introducing the reliefs in the 1970s and increasing them to 100% in the 1990s: the intergenerational transfer of viable family trading businesses is a public good which is not outweighed by (very limited) additional tax receipts.
Except for the comment that affected APR claimants are predicted to fall by half, and BPR claimants by one-third, HM Treasury has disappointingly not published its own predictions on the effects of the new £2.5m cap, nor has the OBR had the opportunity to provide its own analysis – as it did for the Budget measures just 4 weeks ago. There is still no meaningful impact assessment. Similarly, the Treasury has still not explained how many estates claiming solely Business Property Relief will be affected by the new charge to tax on them.
But the fundamental objection to the hurried and piecemeal changes to this flagship tax policy is that their rationale – and their effectiveness – are impossible to understand. The Government claimed in its press release that it had “listened to concerns” and “carefully considered this feedback” (this firm’s submission to the House of Lords’ Finance Bill Sub-Committee is here). Why now, though? Why not in the recent Budget, when better explanations and reliable data could be provided? The timing, in the wake of unflattering press coverage for the Government about its farming and rural policies in recent days (not least the fallout from its own Farming Profitability Review 2025), might tend to suggest a late attempt at averting a PR crisis. If so, it would be the worst possible way to develop tax policy – especially as the Finance Bill is already before Parliament, and new draft legislation must now be prepared in haste, which may impact on its quality and effectiveness.
These tweaks, such as they are, hint at what the Government’s plans have always needed: a proper public consultation exercise. Only then can affected taxpayers and knowledgeable representative bodies contribute meaningfully to developing the Government’s overall policy objective whilst preventing damaging unintended consequences.
This latest political embarrassment could have been avoided if the Government had just followed its then-policy (which it has more recently discarded) to consult properly in advance on important tax measures. Until then, the Judicial Review claim which Collyer Bristow is bringing on behalf of a group of affected farmers and businessowners remains vital in seeking to hold the Government to its promises. The JR claim is not about the details of the policy, but asks the Court to confirm that the Government broke the law when it failed to consult in accordance with its own policy. The Claimants hope the Court will deal with the Claim early in 2026.
James Austen, Partner, commented:
“Making uninformed and damaging tax policy decisions which are later partially ameliorated by hurried amendments – in the hope of relieving short-term political pressures – is a terrible way of bringing about major tax changes. Farms and other businesses are not like other assets and notwithstanding the increased APR/BPR threshold of £2.5m, the imposition of IHT will still impact on the livelihoods of many owners and their employees. The Government should remove these ill-fated measures from the Finance Bill, pause, consult properly about their real policy objectives and how best to achieve them, and then reintroduce more considered changes in a future Finance Bill.”
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APR/BPR Inheritance Tax Threshold Raised to £2.5m
The Government’s unexpected announcement on 23 December 2025 that the IHT threshold for 100% Agricultural and Business Property Reliefs will rise from £1m to £2.5m will be welcome news to many farmers and businessowners. In addition to the Chancellor’s recent concession that allowances are to be transferable between spouses, this will enable married couples to protect trading businesses worth up to £5m from IHT.
Published 23 December 2025
Authors
The Government’s unexpected announcement on 23 December 2025 that the IHT threshold for 100% Agricultural and Business Property Reliefs will rise from £1m to £2.5m will be welcome news to many farmers and businessowners. In addition to the Chancellor’s recent concession that allowances are to be transferable between spouses, this will enable married couples to protect trading businesses worth up to £5m from IHT.
Watering down the Government’s original plans in this way is a promising direction of travel for this troubled policy and the changes will be appreciated – as far as they go. However, minor tweaks of this sort fail to address more fundamental concerns. An interest in any private business is an inherently illiquid asset, and IHT charges for those still caught by the new regime will continue to prove unaffordable for many. Distressed sales (if they are even possible) will therefore be the only way for affected families to meet the new liabilities.
The Government’s modifications still fail to appreciate the policy motivation for introducing the reliefs in the 1970s and increasing them to 100% in the 1990s: the intergenerational transfer of viable family trading businesses is a public good which is not outweighed by (very limited) additional tax receipts.
Except for the comment that affected APR claimants are predicted to fall by half, and BPR claimants by one-third, HM Treasury has disappointingly not published its own predictions on the effects of the new £2.5m cap, nor has the OBR had the opportunity to provide its own analysis – as it did for the Budget measures just 4 weeks ago. There is still no meaningful impact assessment. Similarly, the Treasury has still not explained how many estates claiming solely Business Property Relief will be affected by the new charge to tax on them.
But the fundamental objection to the hurried and piecemeal changes to this flagship tax policy is that their rationale – and their effectiveness – are impossible to understand. The Government claimed in its press release that it had “listened to concerns” and “carefully considered this feedback” (this firm’s submission to the House of Lords’ Finance Bill Sub-Committee is here). Why now, though? Why not in the recent Budget, when better explanations and reliable data could be provided? The timing, in the wake of unflattering press coverage for the Government about its farming and rural policies in recent days (not least the fallout from its own Farming Profitability Review 2025), might tend to suggest a late attempt at averting a PR crisis. If so, it would be the worst possible way to develop tax policy – especially as the Finance Bill is already before Parliament, and new draft legislation must now be prepared in haste, which may impact on its quality and effectiveness.
These tweaks, such as they are, hint at what the Government’s plans have always needed: a proper public consultation exercise. Only then can affected taxpayers and knowledgeable representative bodies contribute meaningfully to developing the Government’s overall policy objective whilst preventing damaging unintended consequences.
This latest political embarrassment could have been avoided if the Government had just followed its then-policy (which it has more recently discarded) to consult properly in advance on important tax measures. Until then, the Judicial Review claim which Collyer Bristow is bringing on behalf of a group of affected farmers and businessowners remains vital in seeking to hold the Government to its promises. The JR claim is not about the details of the policy, but asks the Court to confirm that the Government broke the law when it failed to consult in accordance with its own policy. The Claimants hope the Court will deal with the Claim early in 2026.
James Austen, Partner, commented:
“Making uninformed and damaging tax policy decisions which are later partially ameliorated by hurried amendments – in the hope of relieving short-term political pressures – is a terrible way of bringing about major tax changes. Farms and other businesses are not like other assets and notwithstanding the increased APR/BPR threshold of £2.5m, the imposition of IHT will still impact on the livelihoods of many owners and their employees. The Government should remove these ill-fated measures from the Finance Bill, pause, consult properly about their real policy objectives and how best to achieve them, and then reintroduce more considered changes in a future Finance Bill.”
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Article contributors
James
AustenPartner
Specialising in UK trusts, tax & estate planning, Private wealth, Tax disputes & investigations and Trusts & Inheritance disputes
Henry
LopesAssociate
Specialising in UK trusts, tax & estate planning
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