This year’s Budget brought some much-needed positivity for the farming sector, especially after the upheaval caused by the 2024 budget and changes to APR and BPR. While the IHT policy challenges created last year, haven’t gone away, there was at least a shift in tone and one of the changes will offer some relief for many family farms.

Looking back, 2024’s reforms are still shaping decisions today.

Last year’s overhaul of Agricultural Property Relief (APR) and Business Property Relief (BPR) created real concern for many family farms. From April 2026, the first £1 million of qualifying agricultural and business assets, per person, will still receive 100% relief, with only 50% relief available above that level. This meant that without any planning a small family farm with £4m of business assets (land and plant and equipment) owned between a husband and wife could have seen the final IHT bill increase by over £500k.

For many farms with rising land values, this introduced the possibility of paying Inheritance Tax for the first time in generations. Even with the extension of APR to approved environmental schemes, plenty of businesses were left facing a difficult succession planning landscape not to mention a huge tax headache.

Whilst limited in its support the standout announcement in this year’s Budget was that the new £1m APR/BPR allowance is now transferable between spouses, even if one spouse died many years ago. This mirrors other IHT reliefs and will make a huge difference for many farming families and could prevent unnecessary tax bills for widows and widowers who have held farms together on their own.

As an example, looking at a widowed farmer with an estate value of £1.6m. Previously, they would have seen around £600k fall into the 50% relief band. With the reforms from 2024, that meant an IHT bill into six figures a staggering amount for someone farming alone. Under the latest Budget, however, the unused £1m allowance from their late spouse can now be transferred. This brings the whole estate back within the fully relieved band, preventing what could have been a forced restructuring or sale.

Not only does this restore a combined £2m of fully relieved assets for couples, it also rebalances the significant shift introduced last year, easing pressure on farms that were just tipping over the £1m threshold. This also helps with tax planning when one or another spouse holds a large proportion or all of the land, meaning there is at no need to complete transfers between spouses.

A better Budget, but farming isn’t out of danger

Even with this positive step, the sector still faces serious challenges. Rising input costs, labour shortages, high borrowing rates and unpredictable markets continue to squeeze margins. The 2024 changes haven’t disappeared they’ve just been softened by the new rules. NFU President (Tom Bradshaw) commented on the changes “It’s good to see the government accepts its original proposals were flawed. But this change goes nowhere near far enough to remove the devastating impact of the policy on farming communities.

“It’s only right that agricultural allowances can be transferred between spouses and it’s something we’ve been calling for, but it doesn’t go anywhere near far enough in protecting the working people of the countryside. It does nothing to alleviate the burden it puts on the elderly and vulnerable.

For all farmers the message remains clear, now is the time for early reviews of estate values, partnership structures and succession plans. The new flexibility is a good win, but it only works effectively when used proactively.

Other budget concerns for the farming community

Capital Allowances

For SME’s there were few changes to capital allowances that will really impact them with no changes to the £1m Annual Investment Allowance Limit. Beyond that for farmers with general pool assets the writing down allowance will reduce to 14% (previously 18% and there was the introduction of a new 40% first year allowance for those spending over £1m on plant and equipment.

There was also an extension to the Electric Vehicle 100% first year allowance which will now run until March 2027.

Employment costs

The increase in the National Living Wage to £12.71 for those over 21 and to £10.85 for those aged 18-20 will also bear down on farmers increasing input costs which will likely increase food prices throughout the food chain.

With many in the farming sector being provided with accommodation it should be noted that the accommodation offset was increased by 4.1% to £11,10 per day. The accommodation offset is an adjustment made to ensure that employees are paid the NLW after deductions for rent etc.

Remaining on the employment front there was welcome news for employers using the apprenticeship scheme for training with an increase in funding paid for by the Government. Whilst modest this is good news for SMEs. Interestingly however, no additional funding for training was made available to farmers or those in the agricultural sector unlike the IS8 (Industrial Strategy 8 sectors) who will see an inflow of funding.

It could be argued that this budget was political in nature and designed to calm markets and set a new benchmark for the economic picture moving forward. Beyond that there was little to excite and our advice for faming families is to remain focused on the day to day and ensure succession and tax planning are high on your agenda for 2026.

If you are a farmer worried about the future and what the changes to Inheritance Tax mean for you please contact us to learn how we can help support you.