Inheritance Tax Changes and Succession
Succession planning is rarely top of the list for a farming business. However, recent changes to Inheritance Tax (IHT) mean this is an area that can no longer be put off.
The reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR), due to take effect from April 2026, represent one of the most significant shifts in farm taxation in decades. While the headlines in late 2024 caused understandable concern, the December 2025 revisions have softened the impact but not removed it.
The key message remains the same: planning ahead is essential.
What has changed?
Historically, APR and BPR have allowed qualifying agricultural and business assets to pass between generations with up to 100% relief from IHT. From April 2026, a new allowance of £2.5 million per individual will apply to the combined value of assets qualifying for 100% APR and BPR. Any value above this threshold will only receive 50% relief, resulting in an effective IHT rate of up to 20% on the excess.
Importantly, the December 2025 update introduced two key concessions:
- Threshold increased from £1 million per person to £2.5 million per person
- The £2.5 million allowance is transferable between spouses
The increased threshold is likely to significantly reduce the number of farms affected compared to the original £1 million proposal. The changes follow on from strong industry feedback and lobbying, with the intention of protecting more family farms while still targeting larger estates.
What does this mean in practice?
For many smaller and medium-sized family farms, the revised threshold may mean that with effective tax planning there will be little or no immediate IHT exposure.
However, land, buildings and machinery values can quickly exceed £2.5 million — particularly where their scale, diversification or multiple generations involved. Where values exceed the threshold, agricultural assets within an individual’s estate may start facing an IHT liability for the first time.
This raises a practical challenge: how is such a tax bill funded without impacting the viability of the business? In some cases, this could lead to the sale of assets, borrowing to fund tax liabilities or ownership restructuring – none of which are decisions which you want to make under the pressure of a tax charge.
Why succession planning matters more than ever
While tax is the immediate driver for many conversations, succession planning is not just about IHT. At its core, it is about ensuring business continuity after your death, aligning family expectations, involving the next generation, and ensuring assets are structured in the most tax efficient manner.
One consistent theme across all succession planning is that early action creates more options. Many of the tools available, whether restructuring, gifting, or adjusting ownership, are most effective when implemented over time. Leaving things too late can restrict what is possible and increase the risk of reactive decisions.
It is also worth noting that these rules will apply not only to assets held at death, but also to certain lifetime transfers, trusts and business structures. This adds another layer of complexity that needs careful consideration and professional advice where applicable.
The takeaway is straightforward: those who plan early will have the greatest flexibility and control. As with many aspects of farm management, the best outcomes are rarely achieved by reacting at the last minute.
5 top tips for succession and IHT planning
- Start the discussion early - Succession is not just a tax exercise. Open conversations within the family and business help manage expectations and provide clarity for the future.
- Understand your position - Take time to assess the current value of your personal estate and how your share of agricultural/business assets sit against the new £2.5 million threshold.
- Review your structure - Ensure land, assets and trading activities are structured appropriately. Poorly aligned structures can impact eligibility for APR and BPR.
- Take professional advice - Accountants, solicitors and consultants all play a role. A joined-up approach ensures both tax efficiency and practical farming considerations are addressed.
- Keep plans under review - Legislation, business performance and family circumstances all change. Succession planning should be revisited regularly, not treated as a one-off exercise.
Andrew Coalter, Senior Agricultural Consultant and Area Manager, Andrew.Coalter@sac.co.uk
Posted by SAC Consulting on 16/04/2026
