The UK government has announced an increase in the Inheritance Tax (IHT) allowance, effective from 6th April 2026. The threshold will rise from the previously announced £1 million to £2.5 million. This comes on top of the announcement in the Budget that the allowance would be transferable to a surviving spouse if unused. The total allowance available for a married couple will now therefore be £5million.
What has changed?
Following a year of campaigning from the farming community and rural representatives, ministers have framed the move as a response to these sustained concerns. Campaigners have previously warned that the £1 million threshold risked forcing sales or fragmentation of family farms when Estates are passed between generations.
The new allowance is available for assets eligible for Agricultural Property Relief (APR) and Business Property Relief (BPR), so the main beneficiaries of the increased allowance will be family farms and trading businesses rather than all Estates. Officials and industry groups expect the change to significantly reduce the number of Estates affected by the new cap, though larger estates above the increased threshold will still potentially face much increased potential tax liabilities.
There will be a fiscal cost to the public finances, with estimates suggesting a notable but not unlimited hit to Treasury receipts; precise figures will appear in forthcoming fiscal documents and the Finance Bill.
The announcement offers meaningful relief for many family farms and small trading businesses who would otherwise have Estates exceeding the previous allowance.
The advice and most appropriate next steps will depend on the individual circumstances in each case so if you would like to discuss how these changes will affect you, please get in contact with a member of our team.
