The Autumn Budget 2024 introduced significant changes to Inheritance Tax (IHT), with new restrictions on Agricultural Property Relief (APR) and Business Property Relief (BPR). Previously, estates have been able to claim unrestricted APR and BPR on qualifying assets. So, subject to review of claims on assets such as farmhouses and workers cottages, little action was required to ensure full IHT relief.
However, from 6 April 2026, there will be a combined limit of £1 million for 100% relief for all estates, with only 50% relief beyond that.
Consider a relatively modest farm of 400 acres worth £14,000 per acre, buildings worth £400,000, and cattle, crops, stock, plant and equipment worth £1 million, so a total of £7 million. Suddenly, the IHT liability will increase to £1.2 million. This is a huge amount to pay for any farm, even allowing for the availability of spreading the tax liability over 10 years. Even with instalments at £120,000 per year, this will be unfeasible in comparison with the annual profits of a typical farm of this size.
How Dains Can Help
At Dains, we specialise in helping farming clients navigate complex tax and financial challenges. With these new restrictions in place, early and strategic planning is more important than ever. Here’s how we can support you:
Establishing the current position: It is common for land to be acquired over time, with various ownership splits within the family. Equally, purchase or probate values need to be established, as well as current valuations. This is the groundwork before any changes are put into practice, so the tax consequences of any changes are fully understood.
Succession Planning: The plans of the family, to incorporate both farming and non-farming members for both the short, medium and long-term objectives can be discussed and a plan formulated.
Exploring Tax-Efficient Structures: Once the succession plan is agreed, we’ll advise on asset transfers, gifts, and the use of trusts, partnerships, or other ownership structures that align with the new rules while protecting your family’s legacy.
Mitigating Risks with Proactive Advice: By staying ahead of potential HMRC scrutiny, we can help you prepare for inquiries and minimise the risk of unexpected tax liabilities.
The Importance of Early Action
Delaying planning could mean missed opportunities to optimise reliefs under the updated regulations. With deadlines and increased scrutiny from HMRC, the sooner you act, the more options you’ll have to protect your assets and reduce your IHT exposure.
Farming is more than a business—it’s a way of life, often spanning generations. At Dains, we are committed to helping you safeguard your family’s legacy in the face of these new challenges. Our experienced Accounts Advisory team, led by professionals who understand the unique needs of the farming sector, is here to provide tailored advice and support.
