All About The Tractor Tax

Rachel Reeves delivered the Autumn Budget 2025 on 26th November 2025, setting out tax changes that reach pensions, property, dividends, and inheritance planning across England and Wales. The most significant revision affects agricultural and business property relief: HM Revenue and Customs confirmed on 23rd December 2025 that the 100% relief allowance rises from £1 million to £2.5 million per individual, transferable between spouses and civil partners, for deaths on or after 6th April 2026. Landowners, business owners, and higher earners all face different deadlines depending on which measure applies to them.

Summary

• The 100% agricultural property relief and business property relief allowance rises to £2.5 million per individual under the Finance Act 2026, transferable between spouses and civil partners, for deaths on or after 6th April 2026.
• Business Asset Disposal Relief rises from 14% to 18% from 6th April 2026, having already risen from 10% to 14% on 6th April 2025.
• Unspent pension funds and pension death benefits come within a deceased person’s estate for inheritance tax from 6th April 2027.
• A new High Value Council Tax Surcharge applies from April 2028 to English homes valued at £2 million or more, starting at £2,500 a year and rising to £7,500 for homes above £5 million.
• Dividend, savings, and property income tax rates all rise by two percentage points, on staggered dates between April 2026 and April 2027, while income tax and National Insurance thresholds stay frozen until April 2031.

Introduction

If you own a farm, run a family business, or hold a pension you had planned to pass on, the Autumn Budget 2025 may have left you worried that the ground has shifted under your estate planning. A solicitor who works in private client and estate planning can tell you which of the announced changes actually affect you, when each one takes effect, and what to do before the relevant deadline.

The figures that reached the headlines on Budget day are already out of date in one important respect. The Budget speech on 26th November 2025 set a £1 million cap on agricultural and business property relief, but the Government revised that figure upward to £2.5 million on 23rd December 2025, before the rule had even come into force. Anyone relying on the original Budget day numbers for a farm, a trading business, or a family estate needs the corrected position set out below.

This forms part of our wider guide to estate planning.

What changed for agricultural and business property relief?

The 100% relief allowance for combined agricultural and business property is £2.5 million per individual for deaths on or after 6th April 2026, not the £1 million floated at the Budget. Value above the allowance attracts 50% relief, giving an effective 20% inheritance tax charge on the excess, under the Finance Act 2026, which received Royal Assent on 18th March 2026 and amends the Inheritance Tax Act 1984.

HM Revenue and Customs raised the figure after listening to the sector. As the Chancellor stated in the gov.uk announcement of the revised threshold: “We are increasing the individual threshold from £1m to £2.5m which means couples with estates of up to £5m will now pay no inheritance tax on their estates.” The allowance is transferable between spouses and civil partners, including where the first death occurred before 6th April 2026, so a surviving spouse can use both allowances.

Shares traded on markets that HM Revenue and Customs does not treat as “listed”, including the Alternative Investment Market, attract only 50% business property relief from 6th April 2026, regardless of how much of the 100% allowance an estate has left. Trusts follow transitional rules: a trust settled before 30th October 2024 keeps unlimited 100% relief until its first ten-year anniversary charge on or after 6th April 2026, after which the £2.5 million trust allowance applies.

How does the pension inheritance tax change work?

Most unused pension funds and pension death benefits will form part of a deceased person’s estate for inheritance tax from 6th April 2027, closing a route many people used to pass on wealth tax-free. As HM Treasury states in its technical note on inheritance tax on pensions: “From 6 April 2027, most unused pension funds and pension death benefits will be brought within the value of a deceased person’s estate for Inheritance Tax purposes.”

Business owners face a related deadline on Capital Gains Tax. Business Asset Disposal Relief rose from 10% to 14% on 6th April 2025 and rises again to 18% from 6th April 2026, according to HM Revenue and Customs guidance on Business Asset Disposal Relief. Anyone planning to sell a qualifying business or shareholding faces a higher tax bill after that date.

Who pays the new council tax surcharge?

Owners of English homes valued at £2 million or more face a new High Value Council Tax Surcharge from April 2028, starting at £2,500 a year for properties between £2 million and £2.5 million and rising to £7,500 a year for properties above £5 million. The charge falls on property owners rather than occupiers and sits on top of existing council tax, according to the official High Value Council Tax Surcharge factsheet.

The Valuation Office Agency will carry out a separate valuation exercise in 2026 to identify properties in scope, and the surcharge bands run in four steps.

Property value band	Annual surcharge from April 2028
£2 million to £2.5 million	£2,500
Over £2.5 million to £3.5 million	£3,500
Over £3.5 million to £5 million	£5,000
Over £5 million	£7,500

Landlords face a separate change. Rental income will move to dedicated property tax rates of 22%, 42%, and 47% from April 2027, replacing the standard income tax bands for that income, under the Government’s published note on changes to tax rates for property, savings and dividend income.

What else rises before 2031?

Dividend, savings, and property income tax rates all rise by two percentage points on staggered dates, while income tax and National Insurance thresholds stay frozen until April 2031. Dividend ordinary and upper rates rise to 10.75% and 35.75% from 6th April 2026, according to the HM Treasury technical note.

Salary sacrifice pension contributions face a new limit too. From 6th April 2029, National Insurance relief on salary-sacrificed pension contributions is capped at £2,000 a year, with any amount above that figure taxed as ordinary earnings, according to HM Treasury’s publication on salary sacrifice reform for pension contributions. The Office for Budget Responsibility estimates this will raise £4.7 billion in the 2029 to 2030 tax year.

The income tax personal allowance and higher rate threshold stay at current levels until April 2031. Inheritance tax thresholds, including the £325,000 nil-rate band and the £175,000 residence nil-rate band, are frozen for the same period.

Frequently asked questions

Did the £1 million APR and BPR allowance change after the Budget?

Yes, the Government raised the 100% relief allowance for agricultural and business property from £1 million to £2.5 million per individual on 23rd December 2025, before the rule took effect. The higher figure applies for deaths on or after 6th April 2026 and is transferable between spouses and civil partners, so a couple can shelter up to £5 million of qualifying assets.

When does the pension inheritance tax change start?

The change to bring unspent pension funds and pension death benefits into a deceased person’s estate for inheritance tax starts on 6th April 2027. HM Treasury has published a technical note explaining the mechanics for pension scheme administrators and personal representatives. Anyone with significant pension savings should review their will and nominations before that date.

Will every home over £2 million pay the new surcharge?

No, only homes in England that the Valuation Office Agency identifies as worth £2 million or more after its 2026 valuation exercise will fall within the High Value Council Tax Surcharge from April 2028. The charge is levied on property owners rather than occupiers and applies in four bands rising from £2,500 to £7,500 a year.

Talk to Cocks Lloyd

Speak to our private client team about how the Autumn Budget 2025 tax changes affect your estate, your business, or your family home, and get your wills and trusts reviewed against the new allowances. Contact our wills, estates and trusts team to arrange an appointment.

About the author

Mathew Jones, Legal Director, Cocks Lloyd Solicitors. SRA number 275785.

Mathew Jones is Legal Director and Head of the Private Client Department at Cocks Lloyd Solicitors, with over 20 years of experience in wills, trusts, and estate administration. He has spent 15 years advising on agricultural holdings and complex estates, giving him direct experience of how inheritance tax reform affects farming and business-owning families. Mathew supervises the firm’s Private Client team and regularly advises clients on the practical effect of Budget announcements on wills and succession planning.

Last reviewed: July 2026