Inheritance Tax reforms were first announced in the 2024 Autumn Budget.
The big change was that from April 2026, 100% Agricultural Property Relief and Business Property Relief would only apply to £1 million of qualifying assets, per individual, with 50% relief applying to the balance.
Following a widespread campaign urging the Government to reverse or at least amend the proposals, there was a welcome relaxation in the November 2025 Budget, allowing the transfer of unused allowances between spouses, and on December 23 2025, it was announced that the £1 million limit was to be increased to £2.5million per individual.
The legislation is still going through Parliament, and has not passed into law.
Many farmers are concerned about the impact of such significant changes, but there are ways to put yourself, your family and your business in a better position.
This FAQ guide will help you identify aspects of IHT and succession planning that you need to consider.
1. What should I prioritise when planning the succession of my business and gifting of assets?
Your succession and gifting of assets, either in life or on death, shouldn’t be purely about tax efficiency.
It should be firstly about what you want to do for yourself and your family. Fit your plans within the tax legislation and new rules, rather than the other way round.
You will need to consider:
- What your assets are and who you want them to go to
- Your family’s input and wishes
- What your current will says
- What your current partnership agreement is
- If and when you plan to retire from the farm
- How much income you need to live on
2. When should I start this process?
It’s important to start the process as soon as possible to understand how you will be impacted.
While it’s more beneficial to have plans in place before the changes are introduced, planning can continue after April 2026 and should be done at the earliest opportunity.
You need to have considered all the points above before starting to think about mitigating the potential IHT.
You need a plan of where you would ideally like things to go (or not), and you need to know whether you’re still going to require income from these assets.
3. Will life insurance help pay my Inheritance Tax bill?
For those not ready to gift assets to their children, life insurance will be something to consider.
It is an effective way of protecting the next generation and providing a fund for inheritance tax should anything unexpected or tragic happen, rather than your beneficiaries having to sell off the farm.
For older landowners, life cover will be more expensive, but term cover for seven years until the gift drops out of IHT might be appropriate.
4. My children don’t want to take on the farm. What do I need to consider?
Every family business has different circumstances. There’s no one answer for everybody.
In this situation, mum and dad need to decide if and when they would like to retire from the farm.
When you are ready to stop working or reduce your working hours, you could either sell the farm, rent it out or enter into a joint venture with another farmer.
5. Should I put part of my farm into a trust to improve my Inheritance Tax position?
Trusts can be beneficial, and are particularly useful when you haven’t decided on your succession plans or should you need to need to remove assets from your estate before deciding which family members should own them.
Transferring assets into trust before the new rules are introduced may reduce your IHT liability but this is a complex area and advice should be sought if this is something you are considering.
How important is it to seek advice?
These are huge, once-in-a-lifetime-type decisions and very careful thought is required as it’s unlikely they will be changed.
While the increase in the 100% APR and BPR limit from £1 million to £2.5m will reduce the number of farming businesses impacted by these changes, many still need to take action.
It’s still vital to formulate a plan to ensure you put yourself and your family in a better position.
Rules around estate planning and IHT are very complex and seeking specialist advice will help ensure you pass on your assets in the most tax-efficient way.
