13.02.25

Can I minimise the IHT liability for my farm after the Autumn 2024 budget?

The Autumn Budget set out significant reforms to Inheritance Tax (IHT) that may have profound implications for our farming clients. Most of these changes are to be effective from April 2026, and impact Agricultural Property Relief (APR) and Business Property Relief (BPR), which are valuable tools for farm succession planning.

The most significant change is to be the capping of these reliefs. Previously, APR and BPR allowed for up to 100% IHT relief on qualifying assets, such that farms could potentially pass down the generations free of IHT. Under the proposed new rules, a combined APR/BPR cap of £1 million per person will apply.  Qualifying agricultural and business assets exceeding this threshold will be eligible for relief at 50%, effectively reducing the standard 40% IHT to 20%. Whilst the proposal is that any IHT due could be paid (interest-free) in ten equal annual instalments, finding these funds is likely to be a burden for many farming families.

The proposed changes to APR and BPR represent a significant shift in the UK’s approach to these reliefs. The government asserts that these reforms will enhance fairness in the tax system by preventing the wealthiest individuals from disproportionately benefiting from IHT reliefs. Whatever the motive, these reforms necessitate careful consideration and proactive estate planning by those who may be impacted to ensure the continued viability of their farms and businesses.

We are working with clients and their advisors to look at a raft of solutions which might assist, as we await draft legislation. This could include lifetime gifting to family members and/or the creation of trusts.  Further guidance is expected shortly in the form of a consultation paper on how their use will interact with the proposed new rules.

For professional assistance in navigating these complex changes and optimising your IHT reliefs, please get in touch with one of our experts within the Agriculture and Landed Estates Team. We can help you protect the future of your farm for the generations to come.