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By Ben Allman, Head of Agribusiness and Business Services Partner
For most of 2025, farming families across the country sat down at kitchen tables and weighed up a set of decisions that had felt unthinkable a year earlier. Sell some land. Bring forward a gift. Restructure the partnership. Marry, in some cases, after decades of cohabiting. The trigger was the Autumn Budget 2024 announcement that, from April 2026, Agricultural Property Relief and Business Property Relief would be capped at a combined £1 million per person, with anything above that attracting only 50% relief and an effective 20% inheritance tax rate.
Then, on 23 December 2025, the cap was raised to £2.5 million, with full transferability between spouses and civil partners. The figure many couples now talk about, £5 million, is real but contingent. For an unmarried partnership of any length, the cap stays at £2.5 million per person and there is no transfer.
Three months in, the public conversation has largely moved on. The mood in the trade press has softened. Some of the protest energy has dissipated. But on the ground, in the conversations I have been having with farming families over the spring, the picture is more complicated than the headlines suggest. The £2.5 million cap is genuinely better than what was on the table this time last year. It is not, for most working farms with any meaningful acreage, the end of the matter.
What the December concession actually changed
The shift from £1 million to £2.5 million per person is significant, and it ought to be acknowledged plainly. HMRC's own estimates, made before the concession, suggested around 1,100 estates a year would pay more inheritance tax under the original proposals. The revised cap reduces that number further. For families whose entire farming interest sits comfortably inside £2.5 million, or £5 million between two spouses, the practical position is close to what it was before April. The 100% relief still applies. Succession can proceed largely on the assumptions previous generations made.
What did not change is more important. The default rate of relief above the cap is still 50%, producing the same effective 20% inheritance tax charge. The cap is per person, not per farm, and only transfers between spouses and civil partners. AIM-listed shares no longer qualify for 100% relief at all, regardless of how the cap is used. And from 6 April 2027, unused pension funds will be brought into estates for inheritance tax purposes, with no APR or BPR available on those pension assets. That last point has not yet had the attention it deserves, particularly among families who have spent the past decade being told to leave their pension untouched as the most tax-efficient pot to pass on.
"The £2.5 million cap looks generous on paper. On a working farm of any meaningful scale, in a part of the country where land values have done what they have done, it is closer to a planning constraint than an exemption."
The decisions that cannot be unwound
The harder reality, and the one I find comes up most often, is that the year of uncertainty between October 2024 and December 2025 was not a quiet year for farming families. Many acted on the assumption that the £1 million cap was the settled position. Land was sold to children at undervalue. Partnerships were restructured. Gifts were made into trust before 6 April 2026 to take advantage of transitional rules. In a handful of cases, farms that had been held in single ownership for generations were broken up between spouses to use two allowances under what was then thought to be a much tighter regime.
None of that can be reversed by a December press release. A gift made in good faith under one set of rules cannot be returned because the rules later moved. A trust settlement is what it is. A sale to the next generation cannot be undone without triggering a fresh set of consequences. Where families restructured for the £1 million world and now find themselves in the £2.5 million world, the planning is not wrong, but it is rarely the planning they would have chosen had they known. There is a quiet cost to that, and it is one the headline figures do not capture.
Where the £2.5 million cap still bites
It is easy, in London, to look at £5 million per couple and conclude that the working farm is now safely outside the regime. Land values argue otherwise. In much of the Midlands and the South, arable land sits comfortably above £10,000 an acre and prime ground considerably higher. A 300-acre working farm with a farmhouse, modern buildings, machinery and a modest diversified income stream can pass £5 million in valuation without anyone in the family feeling particularly wealthy. They feel, instead, like they are running a hard business on tight margins, which is what they are.
That gap, between the asset value HMRC sees and the cash a farm can actually generate, is what makes inheritance tax on farmland so difficult. A 20% effective charge on the slice above the cap is not catastrophic on paper. Paying it without selling the land that produced the liability is the problem. The extension of interest-free instalments to all APR and BPR property helps, but ten years of instalments still has to come from somewhere, and the farm has to keep trading through it.
What to do now, three months in
The right response is not panic, nor relief. It is a proper review of where each family actually stands under the new rules, with the December concession factored in, the irreversible decisions of 2025 acknowledged, and the 2027 pension changes built into the timeline. For most families I work with, the priority work over the next twelve months falls into a small number of areas. Wills almost always need amending, because clauses that previously assumed unlimited relief now waste allowance if left unchanged. Partnership agreements need to evidence what is genuinely partnership property and what is held personally, because the line matters more than it used to. Cohabiting couples with farms above £2.5 million now have a tax conversation to have about marriage that they could previously avoid. And anyone with a meaningful pension pot needs to revisit the assumption that it is best left untouched, because from April 2027 that assumption stops being true.
None of this requires dramatic action. It does require deliberate action, on a timetable, before the next set of changes lands. The families I have seen handle this best are the ones treating the new rules as the new normal and planning into them, rather than waiting to see whether the policy moves again.
If you would like to talk through how the April changes affect your own succession plans, our agribusiness team works with farming families across the Midlands and beyond on exactly these conversations.
This article has been prepared for information purposes only. Formal professional advice is strongly recommended before making decisions on the topics discussed in this release. No responsibility for any loss to any person acting, or not acting, as a result of this release can be accepted by us, or any person affiliated with us.
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