What Farmers Need to Know and Do
– An Overview: Kindly provided by Darwin Gray LLP
In the 2024 Autumn Budget the Chancellor proposed major changes to Agricultural Property Relief (APR) rules from 6 April 2026. These changes were unexpected, sending shockwaves throughout the agricultural community and gave a significant blow to generations of farming families.
But what do we really know about these changes and what are the anticipated effects? What should a farming family now consider, and what steps they should take to mitigate the effect of these changes?
In this article, legal experts at Darwin Gray explore what is APR and what are the proposed changes. They also give tips on how to adapt to these proposals and how farmers should plan carefully for the future.
What is Agricultural Property Relief (APR)?
APR is a relief from Inheritance Tax (IHT) on agricultural property. It reduces the amount of IHT farmers and landowners are liable to pay when a farm or land is passed down to the next generation after death. Currently, if APR is available, it applies to 100% of the land to be passed down, which means (in the vast majority of cases) no IHT is payable by farmers and/or landowners on the land that they own. This APR has therefore helped farms to stay within the family ownership from one generation to the next, and allow farming businesses to continue.
What is Business Property Relief (BPR)?
BPR is a similar relief but relates to certain business assets. Currently, if BPR is available, this will apply at 100% for certain business interests and unlisted shares, and at 50% for certain eligible assets.
What changes were proposed in the Autumn Budget?
The main proposed changes announced in the Budget are that, from 6 April 2026:
Capping of APR – the relief will still be available at 100%, but is limited to the first £1 million of the combined agricultural and business property.
- The connection here between APR and business property is significant as many farmers who have business property to which BPR could apply could also previously lead to a 100% reduction in IHT.
50% relief above the threshold – where the value of qualifying assets to which APR applies or to which APR and BPR combined exceeds the £1 million cap, the rate of relief will be reduced to 50%.
How should you adapt to these changes?
Here is a list of things we recommend that you or anyone potentially affected by the proposed changes, should do now –
1. Determine the likely IHT liability as a result of the changes
It is impossible to plan effectively until your potential tax liability is known. If your assets which could be subject to APR and/or BPR are less than £1m, the IHT position will likely not change in 2026.
However, a comprehensive analysis of all assets and liabilities in your estate, along with how they will be distributed under your Will, is vital.
2. Review your Wills
Review existing Wills that you have made or need to make carefully and consider if there are any changes which might improve the overall IHT position. It may be that provisions which were previously IHT efficient will be less efficient under the proposed new rules.
3. Do not take hasty action: plan carefully!
The changes announced are proposals and not yet law. While it may be wise to start to plan, remember that we do not yet know the final rules.
However, you may consider thinking about the following: –
· Take advice from Independent Financial Advisers (IFAs). It may be that there are alternative options for paying IHT, such as whole-of-life insurance cover.
· While everyone’s circumstances are different, it is likely that many farmers will need to consider lifetime giving/transfers as part of their overall IHT planning strategy, but this must be considered carefully and should be planned properly. Seek expert advice to assist you with this.
4. Time – do not panic
If you make significant gifts in your lifetime, the amount of IHT payable on those gifts will decrease over the following 7 years. If you live longer than 7 years, then no IHT will be payable on those gifts. It is wise therefore to consider what gifts you may be able to make in your lifetime, but there is no need to rush into decisions. Take your time and seek advice from legal and financial experts who can guide you through this process.
Whilst these proposals have caused a great deal of concern, as we have set out above, there are a number of steps that can now be taken by Farmers and Landowners to mitigate the situation. With some careful planning, farmers and landowners can engage in a number of measures that can assist them to minimise their potential exposure to IHT.