Tax burden on Agricultural Estate Planning

The Autumn 2024 budget brought significant changes to inheritance tax (IHT) relief, particularly affecting Business Property Relief (BPR) and Agricultural Property Relief (APR). These reliefs, currently used to reduce IHT on specific types of property - business and agricultural assets, are crucial for your estate planning strategies. Understanding these changes is key to maintaining control over your assets.

However, the latest announcement introduces caps and limits to these reliefs, aiming to prevent what is viewed as “excessive” use of IHT reliefs. Although the announcement suggested that small farms would be protected, the harsh reality is that the majority of small farms are likely to be over the £1 million threshold, with the average value reported to be around the £3 million mark. This could mean a significant increase in the tax burden for many.

Key Changes to BPR and APR

Business Property Relief (BPR) and Agricultural Property Relief (APR) will be subject to a combined cap of £1 million at 100% relief. Any assets attracting this relief above £1 million will only qualify for 50% relief, with the balance taxed at 40%. 

This change will be effective from April 2026.

Impact on Small Farms and Business Holdings

These reforms will certainly affect estate planning strategies for those in agriculture or with substantial business holdings, as well as investors in AIM shares. They may prompt you to adjust your inheritance tax and succession planning.

Why talk to our Agriculture and Estates team

Birkett Long is one of the few law firms in East Anglia with a dedicated team of specialist agriculture solicitors. Our expertise spans all aspects of rural law, property, and agri-busines. We are here to address any issues and questions you may have with expertise and insight.

With a rich history of assisting farming families, Birkett Long provides expert advice to navigate these challenges. Our proactive approach ensures that your farming business is protected and prepared for the future, helping you address legal complexities and secure your farm’s legacy.

Following the changes announced on 30 October, please call the team for a free, no obligation conversation on 0330 818 3067.