Inheritance Tax Relief for Farms Capped at £2.5m
Inheritance Tax Relief Cap Set at £2.5m for Farmers and Businesses
United Kingdom | 23 December 2025
The UK government has confirmed that inheritance tax (IHT) reliefs for farmers and family-owned businesses will be capped at £2.5 million, under reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR), according to an announcement from the UK Government.
The changes introduce a combined £2.5m relief threshold, replacing the previous uncapped structure where APR and BPR could be applied separately. Ministers say the reform is intended to modernise the system, target relief more effectively and prevent abuse, while still supporting genuine family businesses.
However, the announcement has triggered concern across the farming sector. Many livestock farms, particularly land-heavy and multi-generational operations, already exceed £2.5m in asset value despite relatively modest cash flow. Industry groups warn that the new cap could increase inheritance tax exposure, complicate succession planning and discourage long-term investment.
The timing of the reform adds to wider pressure on agriculture. Falling cattle and sheep numbers, rising costs and regulatory change are already weighing on confidence, especially in Scotland and other livestock-dependent regions. Critics argue that the £2.5m cap risks accelerating farm exits if families are forced to sell land or businesses to meet tax liabilities.
The government has said further guidance will follow on how the cap will operate in practice, including eligibility rules and transitional arrangements. Farm organisations are calling for clarity and warning that without adjustments, the reform could undermine resilience in domestic food production.
Source article: GOV.UK | 23 December 2025
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