Alison Pryde
- Director
The changes to inheritance tax (IHT) reliefs for farmers and landowners, announced by the Chancellor on 30 October 2024, will have a considerable impact on plans for succession. These changes, effective from 6 April 2026, impact the way agricultural property relief (APR) and business property relief (BPR) are applied, particularly with the introduction of a cap on the amount that qualifies for 100% relief.
Historically, farmers could pass qualifying assets to the next generation upon their death, benefiting from full APR or BPR, which allowed the land and assets used in the business to transfer free of IHT. However, with effect from 6 April 2026 gifts by an individual will be subject to a combined cap of £1 million on the amount that will qualify for 100% relief. Any qualifying assets exceeding this cap will only receive 50% relief, resulting in an effective IHT rate of 20%.
The cap will also apply to any lifetime gifts made on or after 30 October 2024 where the donor dies after 5 April 2026 and within seven years of the gift.
Advice immediately following the Budget was not to take hasty action. The changes announced were not yet law and HMRC was to publish a technical consultation and further detailed guidance of the proposals.
A consultation on the interaction of the IHT reforms with both existing and new trusts was published on 27 February 2025 and ran until 23 April 2025. We now await the Government’s response to the results of the consultation and the publication of draft legislation. As such certain elements of the proposals remain at best uncertain.
What is clear from the proposals is the following:
There is sufficient clarity to now consider taking steps to mitigate the impact of these changes, including:
Valuation will be key to any planning and should be instructed before making any gifts. Despite best efforts, it may not always be possible to reduce IHT liability to nil. The consultation confirmed that where IHT is payable on assets qualifying for APR/BPR, the liability may be paid in ten annual interest-free instalments.
The changes to IHT reliefs for farmers and landowners represent a significant shift in succession planning. By understanding the new regulations and taking proactive steps, such as lifetime gifting, reviewing trusts, and updating wills, farmers and landowners can mitigate the impact of these changes. As always, detailed advice should be sought to navigate the complexities of tax planning and ensure compliance with the new rules. It is also important to remember that tax is only one of a number of factors to consider when planning for the succession to family-owned property, businesses and wealth.
To discuss these issues, contact a member of our expert team today or email alison.pyrde@andersonstrathern.co.uk