Securing your farming legacy: How to prepare for the 2026 Inheritance Tax Reforms

Despite furious protests from the country’s farming fraternity, the sweeping reforms announced in the 2024 Autumn Budget will with the information we have to hand, take effect from 6 April 2026, significantly altering how agricultural property relief (APR) and business property relief (BPR) apply.

Under the new rules, each individual will have a £1 million allowance on the value of qualifying agricultural and business property eligible for 100% IHT relief. Any qualifying property above that threshold will receive relief at a reduced rate of 50%.

However, following a technical consultation published on 27 February 2025, the government clarified how these reforms apply, particularly in relation to trusts. These updates are crucial for families looking to retain wealth through generations without excessive tax burdens.

What’s Changing and Why It Matters

Currently, farming families benefit from generous IHT reliefs—100% APR and BPR on qualifying assets. But from April 2026, this relief will be capped at £1 million per individual, with a 50% rate applying beyond that. This could dramatically increase IHT liabilities for many farming estates.

Although tax can still be paid in 10 annual interest-free instalments, many families fear the financial impact will be unsustainable without careful planning. That’s where proactive succession strategies come in.

Will changes and Trusts

Making the Most of the £1 Million Allowance

Each individual retains a £1 million APR/BPR allowance, which refreshes every 7 years, in addition to the existing nil rate band. Couples can combine their nil rate bands (£650,000 total) and also together pass £2 million of APR-eligible assets IHT-free if properly structured across their Wills.

To prevent the relief cuts affecting remaining assets, we advise you to ensure that £1 million worth of agricultural property passes to the next generation on each death. If unused on first death, the opportunity is lost meaning a higher IHT bill for your loved ones.

If succession decisions are not yet made, or immediate transfer of full ownership is not feasible, placing assets into a discretionary trust remains a valid option to allow both your spouse and the next generation to benefit.

Key Trust Implications

• Trustees (for relevant property trusts) get a single £1 million APR/BPR allowance, which refreshes every 10 years at anniversary charges.
• Exits from the trust also use this allowance, and allowances used at exits reduce what’s available at the next charge.
• Anti-fragmentation rules now limit how this allowance applies:
• Trusts settled before 30 October 2024 retain separate £1 million allowances ("grandfathered").
• Trusts settled on or after that date share a combined allowance, allocated chronologically or apportioned if settled the same day.

Transitional Rules You Need to Know

The consultation provides a transition period for those acting before the reforms come into play:

• Transfers before 30 October 2024 are largely unaffected—100% relief continues under current rules.
• Transfers between 30 October 2024 and 5 April 2026 (the “transitional period”):
• If the donor dies before 6 April 2026, the old rules apply.
• If the donor dies on or after that date, the new allowances and relief limits apply.
• Trust exits before 6 April 2026 retain full relief; after this date, they are subject to the new cap.

Lifetime gifts

Another way of decreasing your loved ones’ IHT bill is by making outright gifts of farming assets to your intended beneficiaries while you’re still alive.

• If you gift farming assets and live for 7 years, they fall out of your estate for IHT.
• Gifts must be outright and unconditional—retaining benefit (e.g., income) risks inclusion in your estate.
• Watch for capital gains tax (CGT) on gifts, and the risk that the asset may be lost if the recipient dies, divorces, or goes bankrupt.

With the 7-year refresh on the individual APR/BPR allowance, lifetime gifts now have added strategic value if spaced appropriately.

The enduring benefits of agricultural assets

With the IHT relief cuts looming, many may be tempted to simply sell up and liquify their assets. This, however, would mean your loved ones being taxed at a 40% rate on your death, without the benefit of the £1m APR. They would also lose the option to pay in 10-yearly instalments, recently extended to all qualifying property, whether receiving 100% or 50% relief, and interest would be added if any tax were to be paid late.

How we can help

Navigating these changes requires expert, coordinated advice.

Our team of specialist agricultural solicitors works with land agents and accountants to:

• Accurately assess the content and size of your estate.
• Redraft your Will to maximise the new APR/BPR allowances.
• Structure lifetime gifts or trust arrangements for tax efficiency.
• Advise on trust setups or deeds of variation following a spouse’s death.

With careful planning now, farming families can secure their legacy despite the shifting tax landscape.

For more information please contact Sarah Parker, Head of Agriculture at Ware & Kay incorporating Pearsons & Ward on Malton 01653 692247 or email [email protected] to see how we can assist.