The level of the Agricultural Property Relief (APR) and Business Property Relief (BPR) thresholds will be increased from £1 million to £2.5 million, the government has announced.
The change will allow spouses or civil partners to pass on up to £5 million in qualifying agricultural or business assets between them before paying Inheritance Tax (IHT), on top of existing allowances.
The government says the changes come after it listened to concerns of the farming community and businesses about the reforms.
It says it will protect more farms and businesses, while maintaining the core principle that the most valuable agricultural and business assets should not receive unlimited relief.
The change will be introduced to the Finance Bill in January and will apply from 6 April.
Environment Secretary Emma Reynolds said:
'Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming.
'We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms. We are increasing the individual threshold from £1m to £2.5 million which means couples with estates of up to £5 million will now pay no inheritance tax on their estates.
'It's only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain's rural communities.'
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