Recent changes to inheritance tax (IHT) are set to significantly reshape estate planning — particularly for farmers, rural business owners, and landowners.
Traditionally, Agricultural Property Relief (APR) and Business Property Relief (BPR) have provided essential tax benefits, allowing land and business assets to be passed down with minimal IHT liability. However, upcoming reforms will reduce the generosity of these reliefs and add complexity to succession planning.
Here’s a closer look at what’s changing, how rural estates might be affected, and what steps landowners should consider now.
Key changes to be aware of:
- Capping of Agricultural and Business Property Reliefs
From April 2026, both APR and BPR will be capped. The first £1 million of qualifying agricultural or business assets will still receive 100% relief. Beyond that, relief will reduce to 50%, creating an effective 20% IHT liability on the excess. Given rising land values, many estates are likely to exceed this £1 million threshold, making this a critical consideration for rural landowners. - Reduced relief for AIM investments
Currently, AIM-listed shares qualify for 100% BPR. Under the new rules, this will be halved to 50%, affecting individuals who use AIM investments as part of a tax-efficient succession strategy. - Inclusion of undrawn pension funds in estates
From April 2027, undrawn pension funds and death benefits will be included in the value of a deceased person’s estate for IHT purposes. For estates that include land, property, and pension wealth, this could result in a notable increase in tax liability.
What this means for rural estates
These reforms may lead to:
- Increased financial pressure on successors — especially where estates are asset-rich but cash-poor
- A greater likelihood of needing to sell land or other assets to meet tax obligations
- A pressing need to review and adjust existing succession plans
What actions should landowners take?
Although the reforms are still some time away, early planning is essential. Reviewing your estate strategy now can help safeguard your family’s future and ensure you’re making the most of available reliefs.
At SMH Group, we help farmers, landowners, and rural business owners to:
- Understand the full impact of IHT changes
- Maximise available exemptions and reliefs
- Structure assets tax-efficiently
- Plan effectively for intergenerational wealth transfer
Speak to our experts
The IHT landscape is shifting, and preparing now can help you stay one step ahead. Whether you’re focused on protecting your farm or ensuring a smooth handover to the next generation, our specialist team is ready to support you every step of the way. Please get in touch with your local office or email us at info@smh.group.
Comments are closed.