Business Clinic: Can I claim my late husband’s IHT relief?

Whether it’s a legal, tax, finance or management question, Farmers Weekly’s expert panel can help.

Below, Kate Bell, partner, Albert Goodman farms and estates team, advises on inheritance tax. 

See also: Business Clinic: how do I plan for tax on retirement farm sale

Q. My husband died in 2003. Following the sale of our family home and with the funds from my late husband’s estate, of which I was the sole beneficiary, I bought a farmhouse with 21ha.

I subsequently bought additional land, which I actively farm, bringing the total holding to almost 71ha. The farmhouse, related farm buildings and grazing paddocks are valued at about £1.25-£1.5m.

I am aware that the farmhouse and permitted curtilage would potentially qualify for principal private residence relief from inheritance tax (IHT) and added to that would be my late husband’s nil-rate band of £325,000.

I am also aware that from 6 April 2026 a new £2.5m allowance will apply to the combined value of business and agricultural property assets that qualify for 100% relief under agricultural or business property relief (APR or BPR).

Also, where the combined value of business assets exceeds the £2.5m allowance, the rate of relief will be reduced to 50% on the value of any qualifying relievable property over the £2.5m allowance.

The crucial question is, will my late husband’s nil-rate band allowance be added to my nil-rate band for the entirety of the estate subsequently purchased after my late husband’s death, which combined would be £5m?

A. You are correct that your late husband’s nil-rate band of £325,000, together with his £2.5m combined agricultural and business property relief allowance should be transferable to you, as neither was used on his death.

This is because the estate would have passed to you as sole beneficiary and the spouse exemption would have applied.

Additional nil-rate band

There is also the residence nil-rate band, which is an additional allowance available where a residence is left to a direct descendant. This could provide a further £175,000 allowance in your case, together with your late husband’s transferable amount. However, it is reduced by £1 for every £2 by which the total value of the estate exceeds £2m before reliefs are applied.

On that basis, depending on your other assets and the overall value of your estate on death, it may be tapered away in your circumstances, so it may not provide any additional relief.

The principal private residence relief to which you refer (now known as private residence relief), relates to capital gains tax rather than inheritance tax and can exempt a home and its curtilage from capital gains tax on a sale, so is not relevant here.

Accordingly, depending on the structure of your farming business, up to £5m of APR and BPR may be available in respect of the relevant qualifying assets, including land and buildings, plant and machinery, crops in the ground and items held in store, after deduction of any relevant debt.

Relief on farmhouse  

Depending on the nature and character of the farmhouse and provided it is the place from which the farming activities are run and managed, it may be that about 70% of its value qualifies for APR, with the balance falling against your and your late husband’s combined nil-rate band of £650,000.

Please note if any gifts are made in the seven years prior to your death that do not qualify for exemption, these may reduce the nil-rate band available on death.

Do you have a question for the panel?

Outline your legal, tax, finance, insurance or farm management question in no more than 350 words and Farmers Weekly will put it to a member of the panel. Please give as much information as possible.

Email your question to FW-Businessclinic@markallengroup.com using the subject line “Business Clinic”.