Inheritance Tax Changes: What Farming Families Need to Know

The inheritance tax changes introduced on 6 April 2026 have become one of the biggest challenges facing farming families. While Agricultural Property Relief (APR) and Business Property Relief (BPR) remain available, the rules are now significantly different, meaning many businesses are reviewing their succession plans and potential inheritance tax exposure.

Understanding how the new rules work and what they mean for your family is essential.

What Changed in April 2026?

Previously, qualifying agricultural and business assets could often pass between generations with unlimited 100% APR and BPR relief.

Since 6 April 2026, the first £2.5 million of qualifying APR and BPR assets benefits from 100% relief. Any qualifying value above this threshold receives relief at 50%, resulting in an effective inheritance tax rate of 20% on the excess.

For many farming families, this represents a significant shift and means inheritance tax may now become a consideration where previously little or no liability was expected.

Why Farming Businesses Are Concerned

Many farms are asset rich but cash poor. Land values have increased substantially over recent decades, while farm profits have not risen at the same pace.
As a result, businesses worth several million pounds may now face inheritance tax liabilities that need to be funded by future generations. Although qualifying inheritance tax can still be paid in instalments over ten years, this does not remove the challenge of finding the cash to pay it whilst continuing to invest in the business and support family members.

Succession Planning Matters More Than Ever

The new rules have prompted many families to revisit questions they may have postponed for years:

• Who will run the farm in the future?
• Should assets pass equally or fairly between children?
• How can retirement income be secured?
• Who owns what assets?
• How can the business remain viable for future generations?

There is rarely a single "right" answer. Effective succession planning is about balancing tax considerations with family objectives and business continuity.

Gifting and Trusts Are Not Simple Solutions

Many people assume the answer is simply to give assets away. However, gifting can trigger a range of issues, including:

• The seven-year inheritance tax survival rule.
• Capital Gains Tax implications.
• Loss of control.
• Gift with Reservation of Benefit rules.

Trusts may still play a role in planning, but they are no longer the straightforward solution many hoped for and should be reviewed carefully alongside other options.

The Importance of Professional Advice

Succession planning often requires input from accountants, tax advisers, solicitors, land agents and financial advisers. Reviewing wills, partnership agreements, ownership structures and retirement plans can help identify opportunities and avoid unintended consequences.

Final Thoughts

The 2026 inheritance tax changes have increased the importance of succession planning for farming families. While APR and BPR continue to provide valuable reliefs, many businesses now need to understand their potential exposure and consider whether their existing plans remain appropriate.

The most important step is to start the conversation. The earlier families review their position, the more options they are likely to have to protect both the business and the generations that depend on it.
If you would like to review your inheritance tax position or discuss succession planning, please get in touch with a member of the Farms and Rural Business team.

At Larking Gowen's Autumn Farming Conference series 2026, inheritance tax, pensions, succession and protecting family wealth will form part of a wider conversation about preparing farming businesses for the future. Click here to reserve your spot now!