UK headlines towards the end of last year were dominated by farmers protesting about proposed limits on the level of inheritance tax (IHT) relief available on agricultural property (known as agricultural property relief (APR)), announced in October's Autumn Budget.
With effect from 6 April 2026, the government's plan is to significantly reduce the amount of relief available to farmers. A £1 million lifetime allowance will be introduced for 100% relief on qualifying property, with any value over this threshold being relieved at 50% (resulting in an effective 20% rate of tax). Until now, agricultural property could be entirely IHT free.
While almost identical changes are being introduced for business property, the response has been less vocal, so far at least.
What are farm owners concerned about?
Farmers are concerned that these changes will make it more difficult for their farms to remain intact for future generations, as their families may be forced to sell land to pay the tax, and that this will have a negative effect on farming in the UK more generally.
The government argues that, in fact, relatively few farms are of a value that will be affected by the allowance, when it is added to the other reliefs to which an estate is entitled. These are the nil rate band (£325,000) and the residential nil rate band (£175,000), where they are available, both of which may be transferred between spouses. However, agricultural land is very valuable in certain parts of the country – for housing and other development, among other uses – and farmers remain concerned.
With the proposals still to be finalised, advisers are beginning to suggest possible planning solutions for farm owners concerned their property may be caught by the new rules. One of the most obvious planning suggestions, at least for those in good health, is to avoid retaining the property until death – which has been common for many farm owners while 100% APR has been universal – and instead to begin the process of passing ownership to the next generation during the owner's lifetime.
This can be achieved in a number of ways, the most straightforward being a lifetime gift, whereby property may be transferred free of IHT provided the donor survives for 7 years after the transfer. Between 3 and 7 years of survival, the tax rate payable on death reduces each year from 40% to 0%. There are also capital gains tax considerations.
What is the likely impact on family relationships and future disputes?
Whether part or all of a farm is passed to individual beneficiaries or held within a vehicle such as a family investment company, for example, this will require significantly more and earlier communication between the current owner of the farm and his or her proposed successors and wider family.
For many years, there has been a stream of reported cases focusing on what is known as "proprietary estoppel". Broadly, these are cases where a property owner, often a parent, has died leaving some or all of their estate in a way which one of their potential heirs argues contradicts promises made to them by the deceased during their lifetime.
For a proprietary estoppel case to succeed, there must be (i) an assurance or promise of sufficient clarity (ii) reliance on that promise and (iii) detriment to the claimant as a consequence of relying on that promise.
A significant number of these cases relate to the family farming business. Often one of the children will commit to working hard on the farm but on the understanding that when their parent or other relative dies, they will inherit it. The detriment that they suffer in relying on this promise is usually their having foregone a different, potentially more lucrative, career elsewhere, and perhaps not acquiring their own home, and life, away from the family property. Dedicating an entire working life to a family business and giving up the possibility of other options is likely to amount to detrimental reliance.
Where the deceased parent's Will contradicts the promise or assurance made by the deceased, the disappointed beneficiary may then bring a proprietary estoppel claim.
A feature of such cases is that there has often (though not always) been no proper family discussion during the deceased's lifetime of their plans for passing on the farm and their estate more generally, or consideration of how it may be fairly divided where there is more than one child, not all of whom choose to follow a career in farming. This lack of planning may have been exacerbated to some extent by the availability of 100% APR and BPR, as there was no incentive to undertake lifetime planning in relation to a farm or farming business to address the risk of property having to be sold to pay a tax charge on the owner's death.
Arguably, the need to address a potential IHT charge may mean that farming and other business families engage in much needed discussions about succession planning and estate management earlier than in the past. Even more importantly, by encouraging lifetime property transfers, the reforms could reduce the occurrence of disputes rooted in proprietary estoppel after the landowner's death.
However, a potential downside to this shift could be an increase in family disputes during the landowner's lifetime. As farm property begins to change hands earlier, disagreements may arise over the distribution of assets, leading to conflicts between siblings or within the wider family circle. Thus, while the changes to APR could reduce certain types of disputes, they may also introduce new challenges that require careful management. Ultimately, the future impact on farming families will depend largely on how well these changes are navigated and how families choose to adapt to the evolving inheritance landscape.
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