Planning Ahead for Upcoming Changes to Farming Relief: What You Need to Know

Farming families have long relied on careful, long-term planning to ensure that their land and businesses are passed down through the generations. However, following announcements in the autumn budget, significant changes are on the horizon that will impact the way these farms are managed and structured for inheritance tax (IHT) purposes. The changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) will affect inheritance tax relief, which makes it crucial for farming families to begin reviewing their planning now.

Starting in April 2026, the current reliefs on agricultural and business assets will no longer be as generous as they are today. With these changes just over a year away, it is important for farming families to take proactive steps to ensure that their farms remain tax-efficient and well-positioned for future generations.

What’s Changing?

Currently, Agricultural Property Relief (APR) and Business Property Relief (BPR) allow for 50%-100% relief from inheritance tax on agricultural and business assets in the event of a death. However, starting in April 2026, these reliefs will be restricted. Under the new rules, a maximum of £1 million of APR and BPR assets will qualify for 100% relief. Anything over this amount will only ever receive 50% relief, meaning an IHT rate of 20% will apply to the excess value.

In addition to these changes to IHT relief, the Capital Gains Tax (CGT) rate on lifetime disposals has already increased to 24%. While the CGT changes have already taken effect, the new IHT rules won’t be implemented until next year, so there is still time for families to review their affairs and make adjustments to ensure their business is structured in the most tax-efficient manner.

Why Act Now?

With the significant changes ahead, it is essential for farming families to begin their planning now. The following considerations should be kept in mind to ensure that the farm is properly prepared for the changes:

1. Review the Ownership of Farm Assets

• In some cases, farms may be owned solely by one individual, which could prevent families from taking full advantage of the available tax reliefs. For farming couples, it may be beneficial for both spouses to hold ownership of the farm in order to utilise the £1 million allowance on each of their deaths.
• Many farms have traditionally been owned by a single family member, often the patriarch, but this structure may no longer be the most tax-efficient one. A review of ownership structures is critical to ensure the farm continues to benefit from maximum reliefs.

2. Consider Succession Planning

• Succession planning is a vital part of ensuring that the farm continues to thrive across generations. Families should start thinking about how to pass the business on to the next generation, both from a practical and legal perspective.
• If children are actively involved in the farm, it is important to consider whether they should also be partners in the business, as this could impact their ability to use the £1 million APR/BPR allowance.

3. Assess the Risks Before Making Transfers

• Transferring assets now may seem like a way to reduce future tax liabilities, but careful consideration must be given to the risks involved. The interaction between CGT and IHT is complex and professional advice will be needed to understand the potential consequences of any asset transfer – both from a tax point of view and also down to family dynamics!

4. Review Documents and Agreements

• It is important to review how the land is owned, as well as any partnership agreements, to ensure they reflect the current structure of the farming business.

5. Update Wills

• Even if a Will has already been created, it should be reviewed in light of the impending changes to inheritance tax rules. The advice that was given when the Will was first written may no longer apply, so updating now ensures that Wills remain as tax-efficient as possible and also reflect your wishes on death.

Tailor-Made Advice for Unique Situations

Every farming family’s situation is unique, and there is no one-size-fits-all approach to succession planning and tax relief. With the upcoming changes to APR and BPR, it’s essential to seek professional advice to ensure the farm remains structured in the most tax-efficient way. Our expert team can help farming families navigate the complexities of these changes and protect their businesses for future generations. Contact us today by emailing PrivateClientNewEnquiries@everys.co.uk or calling 0800 8840 640.

Start planning today to secure the future of the farm and ensure it continues to thrive for generations to come.