What is the new farm inheritance tax threshold in the UK?

Ministers raised the threshold for qualifying farm assets from £1m to £2.5m. Couples can combine their allowances to pass up to £5m tax-free. Any qualifying value above the cap receives 50% relief. The policy aims to cut forced sales and support continuity for family farms across the UK.

How does the 50% relief above the cap work in practice?

Once qualifying farm assets exceed the £2.5m cap, only half of the excess is subject to inheritance tax. The other half is relieved. Non-qualifying assets remain taxed under normal rules. Accurate valuations and clear records are vital so HMRC can separate qualifying items from the general estate.

Does this change affect agricultural property relief rules?

Agricultural property relief remains central but now works within the new cap. Qualifying assets up to £2.5m are tax-free. Above that, qualifying value gets 50% relief rather than full exemption. Detailed guidance will clarify definitions and evidence requirements, so farmers should review land use, occupancy, and documentation with advisers.

What should farm families do now to prepare?

Update wills and partnership agreements, commission current valuations, and map assets by qualifying status. Model possible tax bills at death, including 50% relief above the cap. Align life insurance, liquidity, and gifting strategies. Keep thorough records to support agricultural property relief claims and reduce delays at probate.

Global Market Insights

December 23: UK Eases Farm Inheritance Tax; Threshold Raised to £2.5m

ByHuzaifa Zahoor December 24, 2025December 24, 2025

Inheritance tax farmers policy changed on 23 December as UK ministers raised the farm threshold from £1m to £2.5m. Couples can pass up to £5m tax-free, with 50% relief above the cap. The Treasury expects around £130m less in receipts. The move aims to cut forced sales and ease succession pressure. It may support land values and rural lenders. We explain how agricultural property relief interacts with the new UK farm tax threshold and what investors should watch next.