Proposed changes to Inheritance Tax (IHT) are causing alarm in the UK farming community. If introduced as expected from April 2026, new rules could see agricultural estates over £1 million subject to 20% IHT, even when the land or business is still being farmed by the next generation.
This potential shift in the tax regime has triggered protests and demonstrations across the UK countryside. Farming families are worried that, without the current reliefs in place, it will become much harder to pass on farms without either selling off land or taking on significant debt.
Under the current rules, Agricultural Property Relief (APR) and Business Property Relief (BPR) can reduce the taxable value of a farming estate by up to 100%. This allows family farms to be passed down with minimal or no IHT liability, provided certain conditions are met.
The proposed changes would likely involve the reduction or removal of these reliefs for some types of land or property, particularly where the farm includes diversified business activity, such as holiday lets or renewable energy generation. There is also speculation that unused land, or land leased out under long-term arrangements, may no longer qualify.
For farmers and rural business owners, the implications are significant:
- Land valuations are high, especially in the South and East of England. Even small farms can exceed £1 million in value, making them vulnerable to the new rules.
- Succession planning becomes harder. With a 20% tax charge on top of probate and legal costs, the younger generation may find it financially unviable to continue the family business.
- Borrowing to pay tax could increase pressure on margins, particularly in years with poor yields or falling commodity prices.
So, what can be done?
The key is to start planning early. Succession should be reviewed well before April 2026. This might include:
- Restructuring the ownership of the land or business
- Reviewing whether assets currently qualify for relief
- Transferring ownership gradually during lifetime
- Making use of trusts or lifetime gifting strategies where appropriate
Every farm is different, and tax planning in the agricultural sector requires a bespoke approach. The important thing is not to assume that the current rules will remain in place. The political and fiscal climate is shifting, and reliefs that have long been taken for granted may no longer apply.
If you are involved in farming, rural business, or own land used for agriculture, we strongly recommend a conversation about your current IHT position. Early advice can prevent future problems and help protect the legacy you plan to pass on