91探花

Farmers who presently qualify for 100% business property relief (BPR) or agricultural property relief (APR) may now be sizing up a potential inheritance tax (IHT) bill upon their death, following announcements by the Chancellor in the Autumn Budget last week. This is because, from 6 April 2026, the aggregate of these reliefs will now be subject to an allowance of £1m per person, with only 50% IHT relief being available in excess of this allowance. As a result, much of the value of farms and businesses may be subject to an effective IHT rate of up to 20%.

Farmers are said to be organising protests, and there are fears over the future of the family farm in the UK and the entire farming industry. 

As the dust settles, farmers and landowners may be thinking about the options to mitigate the potential liability on their death. We have looked at the main options that farmers might consider, but it is important to take time to consider all of the options, together with advisors.

Life insurance

Insurers are available who provide individuals with life insurance on a potential IHT liability. This can be expensive, depending upon the age of the individual being insured, but is often significantly cheaper than paying a large IHT bill on the death of a family member. Once an individual reaches an age where insurance becomes too expensive or difficult to obtain, they could reduce their level of insurance and consider some of the other options below.

Gifts

Rachel Reeves announced sweeping changes to IHT treatment in her Budget, but one area where she was expected to make changes, but chose not to, was the treatment of gifts. Currently, where an individual makes a gift to an individual and survives a further seven years, the value of the gift falls outside of their estate for IHT. In addition, where the individual does not survive the gift by seven years, but survives it by three years or more, ‘taper relief’ may apply to reduce the IHT payable. Farmers may therefore wish to start thinking about their succession plans, and the possibility of giving away a proportion of the farm to the next generation.

Reeves also made no changes to the availability of capital gains tax (CGT) reliefs on gifts. Meaning that it can be possible for a farmer to give away land without any immediate CGT liability, as they can ‘hold over’ any inherent gain.

Widening farming partnerships

The new £1m allowance for IHT reliefs will cover property in the estate at death, lifetime transfers to individuals in the seven years before death, and gifts to most trusts (chargeable lifetime transfers). Therefore, it could be beneficial for farmers to spread the ownership of their farming partnerships more widely, between multiple family members. This would increase the number of £1m limits applicable to one farming business. This should be considered carefully as there are commercial implications of including wider family members in a farming business. It adds additional complexity to the business, including that already depressed income, or losses, may need to be shared more broadly and wider family members may not have the desire to be involved.

Other options

Doing nothing is also an option, and in interviews Rachel Reeves has been reminding farmers repeatedly that they are able to use their nil rate band and residence nil rate band, which can in some circumstances total £1m, in addition to the £1m limit to APR per individual. Furthermore, any IHT due can be paid over 10 years. This could assist many smaller family farms. Incorporation of family farming businesses also may be worth considering, and in some instances, may help in a plan to reduce the value of an individual farmer’s assets.

Historically, gifts to trusts have helped farmers and business owners mitigate exposure to IHT charges. We will have a better understanding of how the £1m allowance will impact new and existing trusts after the government publishes a technical consultation on the detailed application of this policy to trusts in early 2025.

All is not lost, there are still options available, and farmers should be considering these carefully with their advisors in the coming weeks.