Inheritance Tax Reliefs for Farmers and Businesses Explained

Inheritance Tax reliefs threshold to rise to £2.5 million for farmers and businesses


The level of the Agricultural Property Relief (APR) and Business Property Relief (BPR) thresholds will be increased from £1 million to £2.5 million, the government has announced.

The change 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 (IHT), on top of existing allowances.

The government says the changes come after it listened to concerns of the farming community and businesses about the reforms.

It says it will 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.

Environment Secretary Emma Reynolds said:

‘Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming.

‘We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms. We are increasing the individual threshold from £1m to £2.5 million which means couples with estates of up to £5 million will now pay no inheritance tax on their estates.

‘It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities.’

Internet link: GOV.UK

CIOT calls for implementation of IHT transitional gifting rule


The Chartered Institute of Taxation (CIOT) has urged the government to implement a transitional rule to allow older farmers and other business owners to gift assets to the younger generation free of Inheritance Tax (IHT) before changes take effect in April 2026.

Current rules incentivise farmers to keep their farms until their deaths, the CIOT stated in a submission to an inquiry by the House of Lords. Its proposed changes would reverse these incentives and promote lifetime giving.

However, for older farmers where there is a risk that they could die within seven years of making a lifetime gift (but after April 2026), the gift would be ineffective for IHT purposes. According to the CIOT, a ‘cliff edge’ is thus created on 6 April 2026.

It has suggested that the risk could be mitigated by amending legislation so that any gifts of relievable assets made between 30 October 2024 and 5 April 2026 would continue to benefit from the old rules even if the farmer died within seven years.

John Barnett, Vice President of the CIOT, said:

‘We are concerned that bringing in changes to agricultural and business reliefs with a cliff-edge date of 6 April 2026 is leading to great anxiety among older clients as they are unlikely to survive seven years and therefore are unlikely to see making gifts as a solution.

‘We think that there is a straightforward and relatively low-cost transitional rule that could address this concern: allowing gifts made between now and April to continue to qualify for the 100% relief currently available. 

‘While this is not a complete solution to the problem – there may be some for whom making a gift is impractical or impossible if they have lost capacity – it should significantly reduce the risk as it gives a viable and straightforward alternative.’

Internet link: CIOT

Christmas crafters urged to check tax rules


HMRC is urging those making money from Christmas crafts, seasonal market stalls, or selling festive items to check if they need to report their earnings.

As the festive season approaches, the tax authority has launched a Help for Hustles campaign.

This aims to remind anyone earning extra income from activities like making Christmas decorations, upcycling furniture for seasonal sales, or running market stalls, that they will need to tell HMRC if they earn more than £1,000.

The campaign’s guidance explains the important distinction between simply decluttering homes by selling unwanted personal belongings – which doesn’t usually require reporting to HMRC – and trading activities like making items to sell for profit, which may be taxable.

Anyone who earned more than £1,000 from side hustles in the 2024 to 2025 tax year will need to register for self assessment as a sole trader, file their return and pay any tax due by 31 January 2026.

Kevin Hubbard, HMRC’s Director of Individuals & Small Business Compliance, said:

‘Whether you’re making handmade Christmas decorations, selling upcycled furniture, or running a seasonal market stall, it’s important to understand when your festive side hustle becomes taxable trading.

‘Nobody wants an unexpected tax bill, so anyone earning more than £1,000 from their side hustle should tell HMRC. Our Help for Hustles campaign provides clear, straightforward guidance to help people get their tax right.’

Internet link: HMRC press release

Self-employed overcounted for decades by official data


Official statistics have overstated the size of the UK’s self-employed population for two decades, according to the Institute for Fiscal Studies (IFS).

The share of national income flowing to those with the highest incomes has also been over-estimated, adds the think tank.

The mismeasurement stems from a longstanding error in the Survey of Personal Incomes (SPI) – a dataset created by HMRC, derived from tax returns and widely used across government for internal modelling.

The number of people with self-employment income has long been smaller than official statistics suggest. Between 2002/03 and 2017/18, the SPI overcounted the number of individuals with income from sole trading or partnerships by more than 500,000 each year on average – an overestimate of around 14%.

Rapid growth in self-employment is a more recent phenomenon than previously estimated. The SPI suggests a steady rise in self-employment since 2000, but the new data show that growth was in fact much slower before 2009/10, only matching growth rates seen in the SPI after the financial crisis.

Isaac Delestre, Senior Research Economist at the IFS, said:

‘The rise of self-employed work has been one of the most important features of the UK labour market over the last 20 years.

‘But these new data reveal a different narrative to the one told by official statistics – with the period preceding the financial crisis showing much slower growth in the self-employed population than we previously thought. That begs the question: what changed after the financial crisis that led to an acceleration in the growth of self-employment?’

Internet link: IFS

Bank deposit protection limit to be increased to £120,000


UK bank customers will benefit from an increase to the maximum amount they would be reimbursed for if their bank were to fail from 1 December, the Prudential Regulation Authority (PRA) has confirmed.

From December, the deposit protection limit, which applies to the Financial Services Compensation Scheme, will protect up to £120,000 of a depositor’s money should their bank, building society or credit union fail.

This increases the limit from the current £85,000 which was set in 2017. It is also more than the previous PRA proposal of £110,000, which the regulator has changed due to consultation feedback and the latest inflation data.

This increase in the deposit protection limit is the latest in a series of regulatory thresholds to be updated by the PRA.

Sam Woods, Deputy Governor for Prudential Regulation at the Bank of England and CEO of the PRA said:

‘This change will help maintain the public’s confidence in the safety of their money. It means that depositors will be protected up to £120,000 should their bank, building society or credit union fail. Public confidence supports the strength of our financial system.’

Internet link: Bank of England

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