A pre-Christmas present on inheritance tax changes…
- Michael Hill
- Jan 27
- 2 min read
The government made a surprise tax announcement in late December when the country’s attention was otherwise engaged.
‘A good day to bury bad news’ is a notorious political phrase that still rings true.(1) More than two decades later, it seems that the UK government’s communication strategies often cloud rather than clarify awkward news.
December provided two classic examples. On the 18th, the last day of parliament before recess, the government issued no less than 13 written ministerial statements.(2) These included an announcement by the Department of Environment, Food and Rural Affairs (DEFRA) of the twice-delayed publication of the review into farm profitability by Baroness Minette Batters, a former National Farmers’ Union chief.(2) Five days later, with MPs safely away from Westminster, DEFRA, HM Treasury and the Department for Business and Trade jointly issued a news release setting out a major change in the new inheritance tax (IHT) rules for farms and businesses.(3)
Those who did notice the announcement were caught by surprise because it altered a key figure in the Finance Bill, which had been published less than three weeks earlier.(4) The Bill was included in legislation for agricultural and business IHT relief reform, which was set out in the Autumn 2024 Budget:
There is currently no ceiling on 100% relief.
As originally proposed, from 6 April 2026 there was to be a £1 million combined limit on 100% agricultural and business relief.
50% relief would apply above the ceiling.
There was no transferability between surviving spouses and civil partners included.
The non-transferability was quietly removed in the Autumn 2025 Budget. The pre-Christmas amendment increased the ceiling to £2.5 million. The combined result of the two changes means that, in theory, a couple could pass on a £5 million family farm (or business) to their children free of IHT. Those who had undertaken planning based on the Chancellor’s 2024 proposals may have wasted both time and money.
The other major IHT change contained in the Autumn 2024 Budget, which brings pension death benefits into the IHT net from April 2027, remains unchanged. That will raise more revenue than the relief changes would have done.(5) However, it has not been the subject of anything like the intense lobbying on IHT relief generated by the farming community, making it much less likely to be the subject of a Christmas 2026 surprise.
Tax treatment varies according to individual circumstances and is subject to change.
The Financial Conduct Authority does not regulate tax advice.
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