Johnston Carmichael tax experts comment on IHT relief changes

Johnston Carmichael’s tax experts have described the UK Government’s decision to increase the threshold for Inheritance Tax relief as an “early Christmas present” for farmers and family businesses.

In a significant U-turn, the level of the Agricultural and Business Property Reliefs (APR/BPR) threshold will now be increased from £1m to £2.5m when it is introduced in April 2026. Spouses or civil partners can also pass on between them up to £5m in qualifying agricultural or business assets IHT free, on top of existing allowances.

This move will significantly reduce the number of estates affected by the 2024 IHT reforms, meaning most family farms and businesses will pay no additional inheritance tax.

Alex Docherty, Head of Private Client Tax, Johnston Carmichael, said: “This is a major row-back on APR/BPR reforms first announced in the 2024 UK Autumn Budget. A huge number of voices across the industry have been working hard to raise concerns and this is a positive step. 

“As well as recognising the important role that family businesses play in the economy, it importantly acknowledges the significant contribution of our farming sector, not just as a source of employment but also in supporting both land management and food security. Notably, the announcement follows the recent publication of an independent review of farm profitability which found IHT was the single biggest concern across the sector.

“Businesses should take advice on what the new allowances mean for them. Larger businesses with value in excess of £5m should continue to plan effectively.”

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The Farming Profitability Review, commissioned by the UK Government and led by Baroness Minette Batters – a former president of the National Farmers Union – was published on 18 December.  It set out 57 recommendations for government and industry to strengthen the resilience and viability of farm businesses. It called for ministers to work in genuine partnership with farmers and the wider food industry. 

Issued on behalf of Johnston Carmichael by BIG Partnership. For more information, please contact [email protected] or call 0141 333 9585.