The decision is a win for the work the Builders Merchants Federation has done with Family Business UK in providing feedback to the Government on the original £1 million threshold.
The government has announced that the level of the Agricultural and Business Property Reliefs threshold will be increased from £1 million to £2.5 million when it is introduced in April 2026.
The move will allow spouses or civil partners to pass on up to £5 million in qualifying agricultural or business assets between them before paying inheritance tax, on top of existing allowances.
On 28 November 2024, the Builders Merchants Federation wrote to the Prime Minister raising members’ concerns over the capping of Business Property Relief on Inheritance Tax and providing specific examples of the potential impact.
Evidence presented by the BMF and its members, along with family businesses across many other sectors, does not support this. Independent economic modelling conducted by CBI Economics for Family Business UK suggests that far from raising revenue, the changes to BPR could result in a £1.25 billion net fiscal loss to the Exchequer.
More than 125,000 jobs are likely to be lost, and economic activity reduced by £9.4 billion as family businesses reduce investment to cover a future inheritance tax bill.
BMF CEO John Newcomb welcomed the announcement, made on 23 December 2025.
He said: “This is fantastic news for many of our member businesses and will allow spouses or civil partners to pass on up to £5 million in qualifying business assets between them before paying inheritance tax.
“This decision is a win for the work the BMF has done with Family Business UK in providing feedback to the Government on the original £1 million threshold for Agricultural and Business Property Reliefs, and will be welcomed by independent family businesses, including builders merchants, across the UK.”
In November 2025, a coalition of 88 cross-party Parliamentarians and 233 family businesses also warned the Chancellor of the Exchequer that proposed changes to Business Property Relief will devastate the UK economy, putting over 125,000 jobs and £9.4 billion in economic output at risk.
Having carefully considered this feedback, the Government is now going further to protect more farms and businesses, while maintaining the core principle that the most valuable agricultural and business assets should not receive unlimited relief. The change will be introduced to the Finance Bill in January and will apply from 6 April.
Raising the threshold will significantly reduce the number of farms and business owners facing higher inheritance tax bills under the reforms, ensuring that only the largest estates are affected.
The number of estates affected by the reforms claiming only business property relief – excluding those holding only AIM shares – will fall by a third, reducing complexity and ensuring support goes where it’s needed most.
Around 85% of estates claiming agricultural property relief in 2026-27, including those that also claim for business property relief, are forecast to pay no more inheritance tax on their estates.
The Government remains committed to making the tax system fairer by reducing the generous inheritance tax reliefs available to owners of large agricultural and business estates, while continuing to recognise the importance of farms and businesses to local communities and the wider economy.
The revised approach continues to ensure that qualifying agricultural and business assets are taxed at a much lower effective rate than most other assets. The changes reflect the concerns that have been raised while preserving the majority of the revenue from reform to help cut debt and borrowing and fund public services. The costings will be incorporated into the next OBR forecast.
