Head of Agriculture at our Rural Law Practice, Verity Gawthorp writes:
“Any hopes that the Government would have a sudden change of heart were quashed recently with the publishing of their Finance Bill. They intend to go ahead with their reforms to Inheritance Tax agricultural property relief (and business property relief) with only minor tweaks to their original proposals.
What will happen?
From 6 April 2026, a £1 million allowance will be introduced for property which qualifies for 100% agricultural property relief (“APR”) or 100% business property relief (“BPR”). Any property over the £1 million limit that would have qualified for 100% APR or BPR will be subject to APR or BPR at 50% instead.
One of the only concessions made by the Government is to allow the £1 million allowance to increase in line with the Consumer Price Index. This will not apply, however, before 6 April 2030.
It was hoped that the Government would make more concessions, including increasing the allowance from £1 million, or perhaps allowing the allowance to be transferrable between spouses (as can occur currently with the Inheritance nil-rate band and residential nil-rate band), but the Government have not gone down this route, citing that transferring the allowance between spouses would “carry an Exchequer cost”.
The Government also state that their reforms will result in around 2,000 estates across the UK paying more Inheritance Tax in 2026-2027 than would have previously been liable to pay. They state that this represents 0.3% of all UK estates. Of these 2,000 estates, the Government state that up to 520 estates claiming APR will be expected to have to pay more Inheritance Tax in 2026 to 2027. They claim that almost three-quarters of all estates claiming APR in 2026-2027 will not pay any more Inheritance Tax as a result of the changes.
We wait to see if the Government’s figures stand the test of time…
What can you do?
The proposed changes highlight the importance of farming families sitting down and getting to grips with succession planning and having those possibly difficult family conversations sooner rather than later (and to review the decisions made on a regular basis). This will ensure that farming businesses are given the best chance to pass down the generations as smoothly (and as pain-free) as possible”.
Planning for the future is one thing you can do to help take, and keep, control. Don’t leave these important things to chance. Contact our Rural Law team to discuss your circumstances and let us help you, whilst you get on with running the farm.