How inheritance tax changes will impact family farms

The UK Chancellor’s Budget announcement has introduced notable changes to inheritance tax relief for the farming community, with significant implications for family farm succession planning.

From April 2026, Rachel Reeves has revealed that the current inheritance tax relief on agricultural and business assets will be revised.

The first £1 million of combined business and agricultural assets will remain fully exempt from inheritance tax. However, assets exceeding this threshold will now receive a 50% relief, leading to an effective tax rate of 20% on amounts above £1 million.

For family farms, many of which are “asset-rich but cash-poor,” this presents new challenges.

With farmland values often exceeding £10,000 per acre, a family farm of around 500 acres could well exceed £5 million, bringing a significant portion under the new 20% tax rate.

Take a £2 million farm as an example. Under the new rules, the inheritance tax bill could rise to £200,000, a sizeable sum that could have a substantial impact on the next generation. With thresholds set relatively low, families may need to rethink their succession plans to manage potential tax liabilities effectively.

In a positive step, the Budget also extends Agricultural Property Relief to include land under environmental agreements from April 2025.

These adjustments reflect a shift in policy that requires close attention to succession planning for farming families and landowners.

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