Entity Setup
Planning Entity Structure in 2026: Why Inheritance Tax Reliefs for UK Farms Just Got Much Bigger
From April 2026 the UK government raised the threshold for agricultural and business property reliefs to £2.5 million—here’s how to plan your farm or family business accordingly.
By NomadicTax Research Team • 5-8 min read • May 6, 2026
## Overview of the New UK IHT Relief Thresholds
The UK government has increased the threshold for **Agricultural and Business Property Reliefs** for inheritance tax from **£1 million to £2.5 million**, effective **April 6, 2026**. This applies to combined qualifying agricultural or business assets between spouses or civil partners. ([gov.uk](https://www.gov.uk/government/news/inheritance-tax-reliefs-threshold-to-rise-to-25m-for-farmers-and-businesses?utm_source=openai))
### Who benefits most
- **Farmers and landowners** passing on family farms or large estates.
- **Small business owners** with business property, shares, or structures qualifying for Business Property Relief.
- Estates that own both agricultural and business assets—this change consolidates assets for threshold purposes. ([gov.uk](https://www.gov.uk/government/news/inheritance-tax-reliefs-threshold-to-rise-to-25m-for-farmers-and-businesses?utm_source=openai))
## Planning Tips for Entity Setup & Estate Structure
- **Review ownership**: adjust who holds what so estates can make best use of the elevated threshold.
- **Trusts and spouses**: Since spouses or civil partners now can pass up to **£5 million** combined relief (both sides), planning transfer timing matters.
- **Valuation of assets**: ensure accurate valuation of agricultural land vs business property before inheritance. Misvalued assets can reduce benefit.
## Examples
- *Example 1*: A farm owned by parent (farmer) and spouse with qualifying business shares valued £2 million and agricultural land worth £1 million—a combined £3 million value. Under old threshold only £1 million relief would apply; now, the first £2.5 million is relieved, significantly reducing inheritance tax.
- *Example 2*: A business owner owning business property (valued £1.8 million) and agricultural land (valued £0.9 million): combined £2.7 million—only £200,000 above the threshold will be taxable for relief purposes.
## Actionable Steps
- Consult with a UK tax specialist to ensure property qualifies under **Agricultural Property Relief (APR)** or **Business Property Relief (BPR)**.
- Examine transforming asset ownership before April 6, 2026—e.g., transferring assets to spouse, setting up business property purpose-built structures.
- Maintain documentation proving active agricultural use or business operations—inactive land or property simply held might fail relief tests.
- Use proper entity vehicles—trusts, family companies—while considering recent Finance Act updates.
## Important Caveats
- Relief is only for **100% relief on qualifying assets up to threshold**; any excess value may still attract inheritance tax.
- Assets that are not qualifying under APR/BPR rules—non-participating land, personal property, non-business assets—do **not** count.
- Legislative changes continue—keep current with Finance Bill measures and final enacted regulations. The Finance Act 2026 further defines relief rules for inheritance tax for estates after April 2027. ([legislation.gov.uk](https://www.legislation.gov.uk/ukpga/2026/11/pdfs/ukpga_20260011_en.pdf?section-235-4=&utm_source=openai))