Farmers and rural families turn to ISAs after inheritance tax shake-up

Farmers and rural families are rethinking how they save, invest and pass on wealth following the government’s inheritance tax shake-up, new research suggests.

NFU Mutual said its latest investor sentiment survey points to a shift towards ISAs, investment bonds and cash savings, with some rural customers also withdrawing money to support family members through gifts or loans.

The research was carried out shortly after changes to inheritance tax took effect in April, including a cap on Agricultural Property Relief and Business Property Relief.

The reliefs have long been used by farming families as part of succession planning, particularly when passing on land, businesses and other assets.

Three-quarters of farmers questioned in the survey said they had made recent investments, including into Junior ISAs and investment bonds.

However, NFU Mutual noted that farmers formed a relatively small sample of the overall survey, which questioned 374 rural customers between 27 April and 17 May.

The insurer said the findings suggested some rural households, particularly those aged 55 to 64, were moving away from adding money to pensions.

Instead, more were putting cash into savings, investment bonds or stocks and shares ISAs.

According to NFU Mutual, the proportion of rural customers investing in stocks and shares ISAs was the highest recorded since the survey began in August 2021.

From April next year, unspent pension pots will also come within the inheritance tax net.

The Office for Budget Responsibility has forecast that 9.5% of deaths could trigger inheritance tax bills by 2029-30, up from 5.2% in 2023-24.

NFU Mutual said the survey also showed that some rural customers were dipping into savings as the cost-of-living squeeze continued.

These withdrawals were typically coming from cash savings rather than longer-term investments.

Some respondents said they were taking money out to supplement their income or pay unexpected bills.

Others said they were using gifts or loans to financially support family members, often as part of inheritance tax planning.

David Nottingham, personal finance expert at NFU Mutual, said: “More rural customers are protecting their wealth by minimising potential losses through less risky investments and using tax wrappers such as ISAs.”

He said this was happening as frozen income tax thresholds and rising incomes meant more people were being “steadily dragged into higher tax bands.”

Mr Nottingham said there were also indications that some people were prioritising saving and investing over further pension contributions.

He said this was “perhaps a response to the changes in inheritance tax which will see unspent pensions come into the IHT net from next April.”

The study found that customers aged 55 to 64, described as the pre-retirement group, were significantly more likely to have invested in stocks and shares ISAs.

Around 27% of people in this age group said they had done so, compared with 16% of customers aged 65 to 74.

The same age group was also significantly more likely to have sought financial advice in the previous three months as they prepared for retirement.

NFU Mutual said consumers continued to cite geopolitics and rising fuel and energy costs as the main drivers of financial concern.

But the insurer said the findings also suggested many rural households were now looking beyond short-term cost pressures and reviewing how best to protect family wealth.

For farming families, the changes to inheritance tax and the planned inclusion of unused pension pots from next April are likely to keep succession and tax planning firmly in focus.