The inheritance tax rules for farming families changed in April 2026, making succession planning an important consideration for farmers and landowners across Lancashire, Cumbria and the wider North West.
Following revisions to the Government's original proposals, Agricultural Property Relief and Business Property Relief now provide 100% relief on up to £2.5 million of qualifying assets per person. Any unused allowance can also be transferred between spouses or civil partners, meaning couples can potentially pass on up to £5 million of qualifying agricultural and business property without inheritance tax, in addition to other available allowances.
While the revised thresholds offer greater protection than initially proposed, families with substantial agricultural holdings still need to consider how their farms will pass to the next generation.
What do the inheritance tax changes mean for farming families?
Previously, qualifying agricultural and business assets could benefit from unlimited 100% inheritance tax relief. Since 6 April 2026, full relief has been restricted to the first £2.5 million of combined qualifying assets per person.
Above this threshold, qualifying assets generally receive 50% relief, resulting in a potential effective inheritance tax rate of 20% on the excess value.
For farming families whose land, buildings and business interests have increased significantly in value over the years, this could create an inheritance tax liability that needs careful consideration.
Although the new rules allow inheritance tax attributable to qualifying agricultural and business property to be paid in equal annual instalments over ten years without interest, finding the money to meet those payments could still place pressure on the farming business.
Review your wills and make the most of available allowances
One of the most important steps farming families can take is to review their existing wills.
The £2.5 million allowance applies to each individual, with any unused amount transferable to a surviving spouse or civil partner. Combined with other inheritance tax exemptions and allowances, this can provide significant protection for family assets.
However, the way land, property and business interests are owned and passed down can still affect the overall inheritance tax position.
Wills should also reflect the family's wider intentions, particularly where some children are involved in running the farm while others have pursued different careers.
Consider lifetime gifts and passing the farm to the next generation
Passing agricultural assets to children or other family members during your lifetime can form part of an effective succession plan.
Gifts made more than seven years before death will generally fall outside the estate for inheritance tax purposes. However, there are important considerations, particularly where the person making the gift intends to continue living on the property or benefiting from the assets.
Capital gains tax, the financial security of the older generation and the practical implications of transferring ownership must all be considered.
Starting these conversations early gives families more options and allows arrangements to be put in place gradually rather than leaving difficult decisions until later.
Look beyond inheritance tax
Farm succession planning involves much more than simply reducing a potential tax bill.
Partnership agreements, land ownership arrangements and the structure of the farming business should all be reviewed to establish how assets are held and whether they qualify for the available reliefs.
Diversified activities, including holiday accommodation, renewable energy projects and other commercial ventures, may also need separate consideration.
Equally important are the personal questions. Who will take responsibility for running the farm? How can children who are not involved in the business be treated fairly? And how will the older generation maintain financial security after handing over control?
Addressing these issues together can help avoid disputes, protect family relationships and provide greater certainty about the future of the farm.
Talk to BSG Solicitors
At BSG Solicitors, we have acted for farming families across Lancashire and Cumbria for generations and understand the importance of protecting both the family business and its future.
Working alongside your accountant and land agent, we can review your wills, partnership arrangements and succession plans to ensure they reflect the current inheritance tax rules and your family's long term objectives.
Whether you are considering passing the farm to the next generation or simply want reassurance that your existing arrangements remain appropriate, our team is here to help.
Contact BSG Solicitors today to arrange a review of your farm succession plans.
