Agricultural Property – Time for action

There has been much discussion in the media surrounding the issue of agricultural property relief and inheritance tax, and the changes to this relief, which will be effective from April 2026.

Currently assets which fall within the scope of HMRC’s definition of agricultural assets can attract either 100% or 50% agricultural property relief with no cap on the total amount of the relief. The net result of this has been that for many years, the majority of agricultural assets have passed between generations of families free of any inheritance tax. The Labour government have confirmed that the rate of this relief will change from April 2026. A cap on the relief will be introduced, and this means that action should be taken to plan for these inheritance tax changes.

From April 2026, the 100% rate of relief for the combined total of qualifying agricultural and business assets will be £1 million per individual. Once this relief has been exhausted, the relief will apply at a lower rate of 50% to the combined value of qualifying agricultural and business property. That will be an effective rate of inheritance tax of 20% on all agricultural and business assets over £1 million. The legislation is still in draft form in respect of the changes to the reliefs, but the combined nature of the relief is likely to affect families with both agricultural and business assets the most.

While individuals retain their nil rate band, i.e the value of personal assets an individual owns at their date of death (up to £325,000), which is taxed at 0%, the changes are likely to have a significant impact on farmers and on farmers who are also business owners. Questions, such as how inheritance tax will be paid to allow farms and businesses to continue, will be of some concern.

While the changes are coming, there is time to plan; however, the adage ‘more haste, less speed’ comes to mind in respect of planning. The more time there is to have proper, thoughtful consultations with professionals, the more tailored that advice can be to your personal circumstances to make changes and put in place structures that can assist with inheritance tax planning for you and future generations of your family.

If you would like any further information or advice on these issues, please contact Naomi Lamont or another member of our Private Client team.

*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.