Budget 2025: Change to IHT announced

Chancellor Rachel Reeves has finally delivered her speech in the House of Commons today, outlining the UK’s latest Budget.

Although she did not mention inheritance tax reliefs in her announcement, it has been confirmed that the planned changes will proceed as scheduled. However, the 2025 Budget does include one change concerning the £1 million threshold for family farm taxation.

The change means that if a married farmer dies, they do not have to leave £1,000,000 of agricultural assets to their children. They can leave it to their spouse, and the spouse will be able to use their deceased’s £1,000,000, in addition to their own £1,000,000, to hand to their children on their death.

If the first death was before 6th April 2026, it will be assumed the entirety of the allowance will be available for transfer to the surviving spouse or civil partner. This will make the rules fairer for widows and widowers, and reduce complexity.  

NFU president Tom Bradshaw commented on the news: “Today the government accepted its changes to inheritance tax are flawed; which we welcome. But this step does not do nearly enough to reduce the damage to the British farming community. The acute and cruel impact on the elderly remains. We keep fighting.

“A huge thank you to NFU members, backbench MPs of all parties who have lobbied hard for a change – and to the public, staunch supporters of British farming. We will continue to work with you all to press for meaningful changes to this unfair and destructive tax.”

READ MORE: What did Rachel Reeves announce in the 2025 Budget?

‘Missed opportunity’

In October 2024, the chancellor first announced the government’s planned changes to inheritance tax, which could affect as many as 75% of farming families.

From April 2026, the first £1 million of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1 million, inheritance tax will apply with 50% relief, at an effective tax of 20%.

Sean McCann, chartered financial planner at NFU Mutual, said that the decision not to amend the proposals to the IHT is a “missed opportunity” for the government and a “major blow” to family-owned farms and businesses across the UK.

“However, the decision to allow the £1m agricultural/business property allowance to be transferred between spouses will help some farming and business-owning families. 

“Although farm asset values can be high, the returns are often low. In many cases we could see land and buildings having to be sold on the farmer’s death to pay the tax bill, with the next generation inheriting smaller, less efficient farms as a result,” he concluded.

READ MORE: Budget day: Farmers try to drive tractors to Whitehall despite ban 

READ MORE: Reform UK pledges support for farmers arrested during today’s protest in London

Read more political news.