Farmers urged to act now as major Inheritance Tax changes loom
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Time is running out for farmers and landowners to safeguard their agricultural businesses from sweeping inheritance tax (IHT) changes set to take effect in April 2026.
These longstanding tax reliefs have been a cornerstone of succession planning for generations, allowing farming families to pass down their businesses without the threat of financial strain. However, impending reforms could put this at serious risk.
Currently, Agricultural Property Relief (APR) and Business Property Relief (BPR) offer 100% relief on qualifying assets, meaning no limit applies to the amount that can be passed down tax-free. This invaluable provision has allowed farming families to retain their land and assets without being forced into sales to cover hefty tax bills.
From April 2026, however, a new cap will come into play. The first £1 million of combined business and agricultural property per person will still qualify for 100% relief. But any assets exceeding this threshold will see relief cut to just 50%, meaning a significant portion could now be subject to a 40% inheritance tax charge.
For many farming families, these changes could spell difficult decisions. If a business owner passes away without careful planning, their heirs may face a substantial tax liability. Without sufficient cash reserves, families could be forced to sell farmland, machinery, or even entire businesses to settle the tax bill.
The good news is that with the right legal and financial planning, you can take steps to mitigate the impact of these changes. One of the most critical steps is estate planning.
Having a valid and up-to-date Will ensures that your assets are distributed efficiently and tax reliefs are maximised. Another option to consider is gifting and trusts. Some farmers may wish to explore making lifetime gifts or transferring assets into trusts; however, these strategies require careful planning to avoid unintended consequences.
Spousal considerations also play a significant role. Unlike some tax reliefs, the new APR and BPR limits are not transferable between spouses. This means that any unused portion of the £1 million allowance cannot be passed on, making it crucial to structure ownership correctly.
Given the complexity of these changes and their potential impact, seeking expert advice is essential. Every farm and business is unique, and tailored legal guidance can help ensure that you make the most of available allowances while avoiding unnecessary tax burdens.
With less than a year until these changes take effect, now is the time to review your estate planning strategy. Don’t leave your family facing an unexpected tax bill - take proactive steps to secure your farming legacy today.
Contact Amy to discuss this further.
