Planning For Inheritance Tax Changes on Deaths from April 2026

Rarely has any tax change created so much uncertainty in the farming sector than the announcement that, from April 2026, the 100% rate of Agricultural Property Relief (APR) and Business Property Relief (BPR) will be restricted to a combined value of £1m per individual. Value exceeding the £1m allowance will be eligible for only 50% relief.

Over the last year, farming organisations like the NFU have campaigned hard for some relaxation but, to date, their appeals appear to have fallen on deaf ears.

Many farming families need to prepare for inheritance tax (IHT) liabilities on farming assets for the first time in more than 30 years. The first step is to undertake a review, considering:

1. Asset identification

Make a list of the assets and how they are (and have been) used.

For land and buildings, each part in different ownership or use needs to be identified separately. For example, there are different tax considerations for:

• In-hand farmed land v property let out

• The main farmhouse v farm employee cottages v other family houses

• Farm building

2. Asset valuation

Each of the assets then needs to be valued. Estimates are needed of both the current market value and, where different, the agricultural value. ‘Market value’ includes (eg) value attributable to development potential, whereas ‘agricultural value’ assumes that the property can only ever be used for farming purposes.

Generally, for a review, we recommend obtaining informal estimates of value from a professional land agent, although some farmers have sufficient market awareness to provide their own good estimates. In either event, for planning, it is essential that the estimates are not understated, because that would under-identify the likely tax exposure.

Where action is being taken, it is prudent to obtain a formal ‘Red Book’ valuation where the action will (or could reasonably) trigger a tax charge.

3. Ownership

The beneficial ownerships of each of the assets need to be identified.

The forthcoming £1m allowance is not transferable between spouses, so each individual’s position must be considered.

On some farms, there may be assets owned by a company or trust.

4. Professional review

When undertaking a review, we will:

• Identify the reliefs available for particular assets. Agricultural property relief (APR) is a relief for farmed land, including buildings that are commensurate with the land and occupied with it for farming. Business property relief (BPR) is a relief for ownerships of some trading businesses, and some personally owned assets used in those businesses. APR is limited to the agricultural value, but BPR is on the whole market value. Both reliefs have 100% and 50% relief rates.

• Calculate the current IHT exposure.

• Advise on steps that could be taken to reduce the IHT exposure, and on other tax implications of those steps.

5. Implementation

Once the action plan has been decided, your solicitor will need to arrange any changes in ownerships and Wills, and we will need to arrange any tax claims, such as holdover relief elections. Where property interests are changed without updating the Land Registry record, an entry will be needed in HMRC’s trusts register.

6. Plan for the IHT

Once the IHT exposure has been quantified, families need to consider how the IHT would be funded.

• Either: IHT on eligible agricultural property can typically be paid over 10 years by instalments, interest-free (provided all payments are made on time). The first payment is due at the end of the sixth month following death. Where interest applies, the interest rate is base plus 4%. Neither IHT nor interest on it is allowable for income tax.

• Or: Full payment (due by the end of the sixth month following death); perhaps financed from cash reserves, bank borrowing, a sale of assets or a life insurance policy.

Recent deaths

Where a family member has died within the last 2 years, it is possible to effectively re-write their will by executing a Deed of Variation, perhaps to allocate assets more tax-efficiently. The provisions in the Deed of Variation can be backdated to date of death for IHT and/or CGT purposes

Our tax specialists would be glad to assist you with IHT planning.