UK levies inheritance tax on farms and family businesses above £2.5m
Estate planners and farm owners must treat estate value over £2.5m as partly taxable
Change
The UK implemented a new inheritance tax regime effective 6 April that provides 100% relief on the first £2.5m of combined agricultural and business property per person and limits relief to 50% on amounts above that threshold.
Why it matters
Relief for larger farm and family-business estates is now tapered, reducing the shelter available on values above the per-person £2.5m allowance. Executors and advisers will face immediate decisions over liquidity and asset structuring to cover tax on the taxable portion.
Implications
- — Farm owners and family business owners with combined agricultural and business property above £2.5m — must revise succession and liquidity plans immediately — otherwise heirs will face inheritance tax on the portion above the £2.5m allowance that receives only 50% relief, potentially forcing asset sales at estate administration.
- — Estate planning and private client tax teams at accountancy and law firms — must review affected client files now and update wills, trust arrangements, and tax projections — otherwise clients' estates risk unexpected tax liabilities and trustees may lack funds to settle liabilities.
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