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 our 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.
In her first Budget, Labour Chancellor Rachel Reeves announced a cap on IHT relief for agricultural assets, marking a significant shift in policy that has long favoured farmers. Historically, APR and BPR have helped preserve family farms by shielding them from large tax bills upon succession.
From 6 April 2026, a new combined cap of £1 million for APR and BPR will apply, meaning estates exceeding this threshold will face IHT liabilities. Any value above the cap not passed to a spouse or civil partner will be taxed at an effective rate of 20%, as only half of the surplus will qualify for full relief. While the government allows the tax to be paid in interest-free instalments over 10 years, this offers limited reassurance to farming families concerned about liquidity and long-term viability.
Matthew points out that the reforms fail to distinguish between genuine working farmers and those using farmland primarily as a tax shelter. The government’s forecasts do not fully account for the diversity of farming operations or the potential disruption these changes could cause. For many family run farms, the new rules could jeopardise succession planning and force the sale of assets, undermining the very continuity that APR and BPR were designed to protect.
Read the full article on the Today’s Wills & Probate website [external link].