It's been one of the most hated tax changes announced by government in recent years and despite protests which have seen farmers drive tractors through Whitehall, a change to Inheritance TaxFarmers reacted with outrage after Chancellor Rachel Reeves announced an increase in Inheritance Tax for farmers back in 2024, which was due to take effect from 2026.

Now, the change is just hours away, with farmers bracing for an increase in the Inheritance Tax rate from Monday, April 6. Right now, agricultural assets and some business assets are not liable for Inheritance Tax due to a 100% Agricultural Property Relief and 100% Business Property Relief (BPR).

But the Finance Act 2026 will change the law so that relief will instead be capped at £2.5M per person (or £5M for couples). When first announced, the limit was set to be £1M, but after outrage from farmers, it was increased to £2.5M, which government says will cut in half the number of farm businesses expected to be hit by the tax increase each year.

It means farmers will pay an effective 20% Inheritance Tax rate on the value of all assets in excess of £2.5M.

The Chartered Institute of Taxation explains the changes. It said: "Currently certain agricultural and business assets are not liable for inheritance tax (IHT), thanks to an unlimited 100% agricultural property relief (APR) and business property relief (BPR). The same rules affect the IHT payable by trusts holding such property.

"Following changes in Finance Act 2026, relief will be capped at £2.5 million per person (or £5 million for couples). This is a combined limit across APR and BPR. Any qualifying value above £2.5 million will receive 50% relief, resulting in an effective IHT rate of 20% on that excess. Shares listed on the UK's Alternative Investment Market (AIM) will be restricted to 50% relief regardless of value."

According to an FAQ issued by financial planning firm Armstrong Watson, it's vital that farmers who could be affected take advice.

It says: "These are huge, once in a lifetime-type decisions and very careful thought is required as it's unlikely they will be changed.

"The increase in the 100% APR and BPR limit from £1 million to £2.5m will reduce the number of farming businesses impacted by these changes, but many still need to take action. It's still vital to formulate a plan to ensure you put yourself and your family in a better position.

"Rules around estate planning and IHT are very complex and seeking specialist advice will help ensure you pass on your assets in the most tax-efficient way."

In a release issued by the Department for Environment, Food and Rural Affairs announcing the changes, the government said: "The government remains committed to making the tax system fairer by reducing the generous inheritance tax reliefs available to owners of large agricultural and business estates, while continuing to recognise the importance of farms and businesses to local communities and the wider economy.

"The revised approach continues to ensure that qualifying agricultural and business assets are taxed at a much lower effective rate than most other assets.

"The changes we are implementing reflects the concerns that have been raised while preserving the majority of the revenue from reform to help cut debt and borrowing and fund public services. The costings for today's announcement will be incorporated into the next OBR forecast."