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Chancellor Rachel Reeves announced a reform on inheritance taxes applied to farms during Wednesday’s Budget announcement.She said from April 2026, the first £1 million of combined business and agricultural assets will continue to attract no inheritance tax.But for assets over £1 million, inheritance tax will apply with 50% relief, at an effective rate of 20%.

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00:00Next, inheritance tax. Only 6% of estates will pay inheritance tax this year. I understand
00:08the strongly held desire to pass down savings to children and grandchildren, so I am taking
00:14a balanced approach in my package today. First, the previous Government froze inheritance
00:20tax thresholds until 2028. I will extend that freeze for a further two years until 2030.
00:28That means the first £325,000 of any estate can be inherited tax-free, rising to £500,000
00:37if the estate includes a residence passed to direct descendants, and £1 million when
00:43a tax-free allowance is passed to a surviving spouse or civil partner.
00:48Second, we will close the loophole created by the previous Government, made even bigger
00:53when the lifetime allowance was abolished, by bringing inherited pensions into inheritance
00:58tax from April 2027. Finally, we will reform agricultural property relief and business
01:06property relief. From April 2026, the first £1 million of combined business and agricultural
01:12assets will continue to attract no inheritance tax at all, but for assets over £1 million,
01:22inheritance tax will apply with a 50% relief at an effective rate of 20%. This will ensure
01:28that we continue to protect small family farms, with three quarters of claims unaffected by
01:38these changes.

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