How to protect your farm’s legacy from IHT changes

For generations, farmers have been the backbone of British life, working the land to provide for their families and communities.

But the recent Budget changes to inheritance tax (IHT) relief are set to challenge that legacy.

Without proper planning, your family could face significant tax bills, threatening the future of your farm.

The government has announced a cap on agricultural property relief (APR) and business property relief (BPR), which protect farms from IHT.

Starting in April 2026, these protections will be limited to £1 million per person, with only 50% relief on any value exceeding that threshold.

The sad reality is that even moderately sized farms could face unnecessary tax burdens – unless you act now.

A looming tax burden

Today, APR and BPR allow the full value of qualifying agricultural property to pass to the next generation tax-free.

But under the new rules, farms exceeding £1 million in value will see a significant reduction in relief, with only partial exemption available for higher-value estates.

Take this example:

A couple owns a farm valued at £4 million. Under current rules, they could pass it entirely tax-free, combining APR, BPR, and nil-rate band allowances.

Under the new cap, £2 million would be fully exempt, but only 50% relief would apply to the remaining £2 million. This leaves £1 million potentially exposed to IHT, generating a possible tax bill of £400,000.

Planning today could prevent this outcome. With the right adjustments, that £400,000 liability could be eliminated entirely.

How to protect your farm

The good news? These changes don’t have to mean losing part of your farm to taxes.

By acting now, you can safeguard your family’s future and preserve your hard-earned legacy.

1. Rebalance ownership between spouses

The new £1 million APR/BPR cap is non-transferable between spouses, meaning an imbalance in property ownership could lead to wasted relief. For example:

If one spouse owns £1.5 million in qualifying assets and the other only £500,000, £500,000 of potential relief is wasted.

By equalising ownership to £1 million each, the couple can fully utilise their combined exemptions.

This simple restructuring could save hundreds of thousands in IHT.

2. Maximise the interaction between reliefs

APR and BPR reduce the taxable value of your estate before applying nil-rate bands (NRB and ANRB).

With strategic planning, you can increase the amount passed tax-free…

Continuing the previous example:

A £4 million farm split equally between a couple could qualify for £2 million in full APR/BPR relief and a further £1m of APR/BPR relief at 50% on the remaining £2m, leaving £1m potentially exposed to IHT.

Each taxpayer potentially has £500k of NRB and ANRB, so for a couple owning a farm with a farmhouse they have lived in, they could cover the remaining £1 million with combined NRBs.

The result? No IHT liability on a farm worth up to £4m.

Without planning, your family could face a significant tax bill on the same estate.

These calculations depend on precise structuring—and getting it right makes all the difference.

3. Make gifting work for you

Gifting part of your farm can reduce your taxable estate while preserving family control.

However, many farmers hesitate to gift property due to concerns about capital gains tax (CGT) or losing access to the land.

Here’s how to address these concerns:

• Gift of business asset relief: Qualifying agricultural property can be gifted without triggering CGT, deferring the tax until the property is sold outside the family
• Partial gifts: You don’t need to give away the entire farm. Gifting a portion reduces IHT exposure while retaining operational control over the remaining property.

Properly structured gifts can significantly reduce tax liability while keeping the farm in the family.

4. Address mixed-use property

Not all farm property qualifies for APR. Buildings with non-agricultural uses or land with development potential may require additional strategies, such as:

• Leveraging BPR for broader relief coverage
• Separating agricultural and non-agricultural assets to maximise exemptions.

Failing to address these nuances could leave a large portion of your estate exposed to IHT.

Why act now?

The changes take effect in April 2026, but waiting to adjust your estate could limit your options.
By planning now, you can:

• Maximise reliefs under current rules
• Restructure ownership to take full advantage of future exemptions
• Explore gifting strategies without rushing into decisions.

Secure your legacy today

Protecting your farm isn’t just about saving money; it’s about safeguarding the legacy you’ve built for your family.

The new rules are complex, but with expert guidance, you can keep your farm intact for generations to come.

Tax Innovations says it specialises in helping farmers navigate inheritance tax changes.

With decades of experience and a deep understanding of APR, BPR, and succession planning, it will work with you to create a tailored strategy that ensures your farm remains your family’s cornerstone.

Contact Tax Innovations today to start the conversation and secure your family’s future.

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