Matthew Yates explores the impact of IHT changes on farming businesses for the next generation in Today’s Wills and Probate
Matthew’s article was published in Today’s Wills & Probate, 22 January 2025, and can be seen here.
Matthew Yates, Partner and joint head of Hunters’ Private Client department, explores how the government's proposed inheritance tax (IHT) changes will affect farming businesses, particularly regarding Agricultural Property Relief (APR) and Business Property Relief (BPR), and the effect these changes will have on farmers' ability to pass their businesses on to the next generation.
How will the latest inheritance tax changes impact farming businesses for the next generation?
In her first Budget as Labour Chancellor, Rachel Reeves announced the government’s plan to impose inheritance tax (IHT) on farmers. News the government would introduce a cap on IHT relief for agricultural assets made big headlines.
Special treatment for farmers in relation to IHT has been consistently given by successive governments of both the main parties for decades. The combination of Agricultural Property Relief (APR) and Business Property Relief (BPR) has ensured the survival of family and farming businesses for the next generation after the owner’s death. But the Budget altered the limits for both APR and BPR with cuts to the aggregate value of both reliefs in relation to farms and farming businesses.
From 6th April 2026, a new combined upper limit of £1 million for APR and BPR will make the estates of farmers with assets above that figure liable to pay IHT. Under the proposed changes, any figure above the £1 million threshold that does not pass to a surviving spouse or civil partner will become subject to an effective tax rate of 20% because only 50% of the surplus value will qualify for full exemption. Although IHT that is due can be paid over a ten-year period with no interest charged while instalments are being paid, that provides little comfort.
Farm owners fall into different categories. Genuine farmers operate in multiple ways to suit diverse conditions and circumstances. They are quite different from wealthy investors or absentee landlords, who acquire farmland with the primary or sole intention of using this as a means of avoiding IHT. Government forecasts, however, do not take into account the impact of proposed changes to APR and BPR.
Read the full article here: How will the latest inheritance tax changes impact farming businesses for the next generation? (Today’s Wills and Probate)
