Updated: February 2026

Concerns about inheritance tax are understandably gripping the farming community, concentrating minds like never before. Two major concessions by the government have helped relieve some concerns.

After the huge changes announced in the October 2024 Budget, there has been great consternation about the additional tax burden on death and calls for the proposals to be delayed. While the called-for delay is not happening, two big changes have been announced to take effect from April 2026.

The good news is that steps can be taken to reduce potential tax exposure. Farming families need to consider these as soon as possible before the changes take effect on 6 April 2026.

The first concession made by the government was to raise the cap on the amount of inheritance tax relief at 100% to £2.5 million from the originally proposed figure of £1 million. The cap – the first such limit since 1992 – will apply to both agricultural property relief (APR) and business property relief (BPR), which will share the £2.5 million proportionally. Most farms qualify for some of each form of relief, with BPR on cash, machinery and stock, rented cottages and farm buildings, subject to the key overriding requirement that the farm business is ‘mainly trading’.

Taking stock of what assets you have

As a starting point, it is worth all farming families taking stock of what assets they have, the realistic current market values (valuations are critical with this new cap) and who owns what.

Some farms operate as a partnership or company trading business, but with certain assets held outside the partnership or company – owned personally, or through a separate partnership or limited liability partnership (LLP). This structure may reduce the available BPR to only 50%, or – if the land is owned outside the company – there may be no relief at all, unless the shareholder also has control of the company.

Good news for spouses

The second major concession made by the government was to allow the £2.5 million cap to be transferable to a surviving spouse on death.. It is therefore similar to the £325,000 nil-rate band (NRB), which is also transferable. Two actions may be worth taking to maximise the allowance:

1.  Review wills to ensure the maximum amount is left to someone other than the spouse on first death.

2.  Consider if there are sufficient assets qualifying for relief in each spouse’s name.

Consider a lifetime gift between spouses now if you don’t both have the full £2.5 million

If the farming business and land has a total value over £5 million, but is all or mainly in one name, it makes tax sense to gift a business share, whether as a partner or shareholder, to the second spouse. Many farms work effectively through a partnership, which is a flexible structure that can adapt to changing needs. 

For those spouses already working as partners, it is a good time to review current market values of assets and thus the value of partnership shares. Where one party is short of the £2.5 million, consider transferring an interest to bring each spouse’s interest over the £2.5 million value. If both parties are not both partners of the business, consider bringing the spouse into partnership. If there is a company structure, ask accountants to advise on its value ahead of a gift of sufficient shares. Valuation is critical. In some cases, specialist advice on current land values from a rural surveyor/agent may be required. Land owned personally under beneficial joint tenancy will likely need to be severed.

What if you are not sure about gifting assets to a spouse?

Some farmers may be reluctant to gift valuable assets now that the allowance is transferable and so the gifts may be considered non-essential from a tax perspective. Concerns about asset protection can be helped by joint ownership or partnership structures. We would certainly recommend that any gift ties in with a new partnership or shareholders agreement, or a review of any existing one. Governance documents can include provisions limiting ownership to family members. Additional protection, e.g., against the risk of future divorce, can be managed with specialist advice from a family lawyer. A nuptial agreement, ideally before marriage (a pre-nup) or a post-nup if already married, could help protect a farm. Full disclosure and independent advice for the two people is needed. This need not be an adversarial process and can be a sensible part of business planning if done in the right way.    

Silver lining of this change

The one positive thing to come from this change is the incentive to undertake lifetime succession planning. Gifting earlier can be encouraging to family already working in a business and can help improve engagement in the next generation. The pre-April 2026 double benefit of not paying capital gains tax or inheritance tax, when 100% relief has been in place, has been an enormous incentive to hold on until death, encouraging those who naturally want to keep control.

There are risks in this traditional approach, including overreliance upon promises of ‘one day all this will be yours’, leading to disputes if the promise is not kept.

Those giving time, effort and expertise to farming businesses can now be brought into ownership sooner to share benefits now but also save inheritance tax. It is likely that families will need to rely upon a layering of partnership, corporate and trust structures, together with nuptial agreements, to meet dual goals of asset protection and tax efficiency.

Gifts of land, partnership interests or shares can be made without an immediate capital gains tax liability if holdover relief is claimed and gifts could become free of inheritance tax if the donor survives seven years following the gift. For those with larger value farms, further gifts can be made after seven years with a new £2.5 million cap.

Specialist advice is needed, ASAP, to take advantage of the opportunities to save inheritance tax, including the potential to gift to trusts. There are opportunities now that will be lost in April 2026.  

John Bunker TEP, freelance lecturer, Consultant Solicitor & Chartered Tax Adviser with Irwin Mitchell, and Naomi Neville TEP, Partner, Wills, Trusts and Estates team, Irwin Mitchell.