The government’s decision to allow agricultural inheritance tax allowances to be transferred between spouses has emerged as a headline change within the autumn budget — but farming leaders say the concession falls far short of what family farms need to survive.
The government has set out the full details of its latest overhaul of agricultural property relief (APR), insisting the reforms will protect small family farms while ensuring the wealthiest estates pay more inheritance tax from 2026.
Farming organisations, however, have warned that the new cap will still leave many families facing higher tax bills when passing on long-established holdings.
Farmers from across the UK descended on central London yesterday (26 November) in one of the most visible rural protests in months, with tractors rolling into Westminster despite a police ban on agricultural vehicles.
The NFU has said that the chancellor’s adjustment to inheritance tax rules “doesn’t come close” to protecting family farms, accusing the government of leaving elderly and vulnerable farmers exposed as sweeping tax reforms approach.
Following the autumn budget, the government confirmed that any unused portion of the new £1 million allowance for agricultural and business property relief will now be transferable between spouses and civil partners.
The change brings the relief in line with existing inheritance tax rules for the nil-rate band and residence nil-rate band, and the Treasury says it will make the system “less complex and fairer” for farm families.
Under the revised arrangements, a surviving spouse or civil partner will be able to combine both allowances, benefiting from up to £2 million of 100% relief on qualifying agricultural and business assets.
Widows and widowers will also be able to use a deceased partner’s unused allowance, even where the first death occurred many years before April 2026.
Government figures suggest the new spousal transfer will reduce the number of estates facing higher tax bills once the wider reforms take effect.
Of the wealthiest 375 estates expected to pay more tax in 2026–27, around 190 will now face a smaller increase or no increase at all, according to Defra. Ministers say almost three-quarters of estates claiming agricultural or business property relief will not pay more inheritance tax under the new structure.
From April 2026, the full 100% relief will be restricted to the first £1 million of combined agricultural and business property. Above that threshold, eligible estates will receive 50% relief and pay a reduced effective inheritance tax rate of up to 20%, instead of the standard 40%. That tax can be paid in 10 interest-free instalments, rather than upfront.
Officials argue the reforms are designed to focus relief on small and medium-sized farms while preventing the largest estates from benefiting disproportionately.
Treasury data shows the top 7% of claims — 117 estates — account for 40% of all agricultural property relief, costing the taxpayer £219 million a year. The top 2% alone account for nearly a quarter of all relief claimed. Ministers say the current system allows a small number of very large estates to receive “significant” tax breaks that could otherwise fund public services.
The government maintains that most family farms will remain fully protected when passing land to the next generation, particularly when combined with other allowances such as the £325,000 nil-rate band and the £175,000 residence nil-rate band, both of which can be transferred between spouses. Depending on circumstances, a couple with farmland can still pass on up to £3 million tax-free to a direct descendant.
Long-standing inheritance tax rules also remain unchanged. Transfers between spouses and civil partners are still fully exempt, and gifts made more than seven years before death fall entirely outside inheritance tax.
Rural advisers, however, report rising concern that some family businesses may still need to restructure holdings or sell assets to manage future liabilities once the cap is introduced.