Specialists in wealth management and inheritance law are urging the government to rethink its tax plans, warning they could unleash financial hardship and administrative chaos on family farms.
Ahead of the budget, STEP, the professional body for trust and estate practitioners, is calling on ministers to reconsider key elements of the Finance Bill 2025–2026.
It argues that proposed changes to agricultural property relief (APR) and business property relief (BPR) — long-standing protections designed to stop farms and trading businesses being broken up to pay inheritance tax — risk hitting the most vulnerable the hardest.
STEP says the reforms would disproportionately penalise smaller family farms, older business owners and their heirs. While younger owners may be able to insure against future inheritance tax (IHT) bills or undertake lifetime planning, STEP warns this is “not an option for elderly farmers and others” who could face unexpected charges under the new rules.
A separate proposal to tax unused defined-contribution pension pots is also raising alarm. STEP and other experts say the change could delay even straightforward estate administration, leaving grieving families exposed to financial risk at a time of acute stress.
With the budget approaching on 26 November, STEP says the government has an opportunity to acknowledge industry concerns and adjust the reforms before they cause widespread problems.
Under the current APR/BPR proposals, set to take effect in April 2026, farms and family businesses would receive full IHT relief only on the first £1 million of assets, with anything above that subject to a 20% tax charge.
Unlike other IHT allowances available on death, this relief would not be transferable between spouses — a design practitioners say introduces unnecessary complexity into an already intricate system.
Emma Chamberlain TEP, spokesperson and barrister, said: “If you are going to give the £1 million allowance at all, then make it transferable.”
She noted that the nil-rate band and residential nil-rate band were made transferable “precisely to avoid the need for complex trust arrangements in wills”, and that failing to follow the same logic here “simply increases unnecessary complexity”.
She warned that better-advised families would have time and resources to plan around the changes, while others could be caught out.
“Those whose spouse has already died or are unaware of the problem will find that in fact it is not £1 million per spouse but £1 million allowance per family – very different from the £3 million that the government says can be passed on tax free,” she said.
Passing on that higher figure would require “quite complex planning”. Younger people may be able to gift £1 million every seven years, but, she added, “This option will not be open to older tax payers.”
STEP is calling for the allowance to be transferable between spouses and civil partners, and for transitional measures to protect older taxpayers who cannot benefit from lifetime planning due to age or ill health.
It says a time-limited arrangement for gifts made before April 2026 — ensuring they remain exempt even if the donor dies within seven years — would prevent older individuals facing tax bills that younger families can avoid.
