The recent changes to inheritance tax (IHT) rules have significant implications for farmers and agricultural business owners. These reforms, designed to prevent large estates from avoiding tax, have inadvertently created challenges for families who wish to pass their farms on to the next generation.
Understanding the New Rules
The key change affects Agricultural Property Relief (APR), which has traditionally provided a substantial exemption from IHT. While APR remains available, new restrictions have narrowed its scope. For example, farms with diversified activities, such as holiday rentals or renewable energy projects, may now face reduced relief.
In addition, the threshold for IHT has been frozen, meaning more estates are likely to exceed the taxable limit over time due to rising land and asset values. This makes proactive tax planning more critical than ever.
Strategies to Mitigate Tax Liability
One effective strategy is to ensure that all qualifying assets, such as farmland and livestock, meet the criteria for APR and Business Relief (BR). Keeping detailed records of how your land is used can strengthen your claim to these exemptions.
Another option is to consider gifting assets during your lifetime. While lifetime gifts are subject to the seven-year rule, spreading gifts over several years can reduce the taxable value of your estate significantly. It is also important to structure these gifts to maximise both APR and BR.
Trusts can also play a role in tax planning, providing a way to transfer wealth while maintaining control over how assets are managed. However, trusts come with complex tax implications, so expert advice is essential.
It may not be possible to mitigate any tax liabilities completely but it could be possible to plan for them to ensure you can still pass on your estate to your loved ones without the need for selling all or part of your estate. It may be possible to take out life cover, whether than be via a a Life Policy, Relevant Life Plan or Key Man insurance. This is something you would need to speak to an adviser about.
The Importance of Early Planning
Delaying tax planning can be costly. At CHW Wealth Management, we help farmers develop comprehensive strategies to protect their legacy. Our advisers understand the unique challenges of agricultural estates and work with you to minimise your tax burden while safeguarding your family’s future.
CHW director Gary Beesley says: “Like most of the general public we were shocked at the Autumn budget announced by The Chancellor Rachel Reeves and the changes that will dramatically affect farmers across the UK.”
Here at CHW we always aim to help our clients and put them in the best possible position by conducting a fact find to fully understand their situation and then putting together a recommendation of tailored solutions’.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief is generally dependent on individual circumstances.
Trusts are not regulated by the Financial Conduct Authority
For further information about us or If you feel you would benefit from talking to one of our experts please visit www.chwwealth.co.uk [chwwealth.co.uk] or email gary.beesley@sjpp.co.uk’
CHW Wealth Management Limited is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the group’s wealth management products and services, more details of which are set out on the group’s website https://www.sjp.co.uk/products. The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.
SJP approved 11/02/2025.
