Farm inheritance tax 'time-bomb' looming as experts urge farmers to act now

Farmers across the UK are being urged to act quickly as looming inheritance tax reforms threaten to create a financial “time-bomb” for many family farms.

Experts from accountancy and advisory firm Azets warn that new restrictions on agricultural property relief (APR) and business property relief (BPR) could leave rural families facing large tax bills and even force the sale of land that has been in the family for generations.

Under legislation due to be introduced through the Finance Bill, full tax relief will apply only to the first £2.5m of qualifying assets per individual, with any value above that threshold receiving relief of just 50%.

Farm businesses are particularly exposed because land values can push estate valuations well above the new tax relief thresholds.

With the rules set to apply to farmers who die after 5 April 2026, advisers say time is running out for families to put succession plans in place.

The policy has created significant frustration across the farming sector since it was first announced.

Rebecca Colmey, director of tax advisory, farming and IHT at Azets, said the lack of early detail caused immediate uncertainty.

“The problems began immediately following the 2024 autumn budget when the restrictions were announced without any detail,” she said.

She explained the rules applied immediately to certain gifts made after the Budget announcement if the farmer later dies after April 2026 but within seven years.

This prompted many farmers to seek advice quickly, even though the legal details had not yet been confirmed.

“But there was no certainty as to the legal form of the changes until the draft legislation was finally made available on 21 July,” Ms Colmey said.

Advisers had expected the government to take on board recommendations from a parliamentary report published earlier in 2025.

“Our team were surprised that the draft legislation ignored the recommendations within the House of Commons’ Report – The Vision of Farming,” she said.

The report suggested maintaining a more generous level of agricultural property relief specifically for genuine farmers rather than reducing relief across the board, including for investors in agricultural land.

Later adjustments were introduced late last year, including allowing unused allowances to be transferred between spouses and increasing the relief threshold from £1m to £2.5m.

Despite this, advisers say many farm businesses remain exposed.

Farm enterprises often carry high asset values due to land prices, meaning estates can easily exceed the new tax relief thresholds.

Robert Anderson, an Azets partner based in Coventry, said the policy is already causing widespread concern among farming families.

“We meet farmers every week and the stress and worry the policy is causing is undeniable,” he said.

According to Mr Anderson, many viable farming businesses have values well above the £2.5m limit.

“Most viable farming enterprises have a value per head in excess of £2.5m and we have a lot of clients impacted by this change,” he said.

Mr Anderson said many farms are asset-rich but cash-poor, meaning land sales could become unavoidable.

“Many acknowledge that parts of their farms may need to be sold to fund the inheritance tax liabilities.”

He added that some older farmers feel under pressure as the deadline approaches.

“Some of the older farmers feel guilty that if they live beyond April 5th they are somehow letting their families down,” he said.

However, inheritance planning is rarely straightforward.

“This is a complicated issue and it’s not as easy as just giving some land away and then hoping you live beyond the seven-year rule when it is free from IHT,” he said.

Trusts are sometimes suggested as a planning tool, but he cautioned they are not suitable for every farm.

“Trusts have been proposed as a planning option, but they won’t suit all farms and are complex – every single case is different and there is no off-the-shelf solution,” he said.

Instead, advisers say farmers should carefully assess the current and future use of each part of the business before deciding on the best course of action.

“We recommend that, if they haven’t already done so, farmers seek good financial and legal advice as soon as possible in order to get proper planning in place and to best mitigate against the tax,” Mr Anderson said.

He also warned that ignoring the issue could leave families exposed to serious financial consequences.

“One of our fears is that there are farmers out there who are tempted to just bury their heads in the sand and hope the problem goes away,” he said.

“Whilst we understand the uncertainty caused by the way the restrictions have been introduced may make farmers hopeful that further changes could be announced, time is running out.”

Mr Anderson added that farmers must understand how the reforms could affect their businesses and seek professional advice before the 2026 deadline.