Those farm owners who do not have a (surviving) spouse or civil partner, or who face a higher chance of dying within seven years, have less ability to manage their affairs so as not to pay inheritance tax.
At the moment, farmland is exempt from inheritance tax under a policy called “Agricultural Property Relief” (APR). In the Budget, the Chancellor announced that she will end that exemption by restricting APR. The cut to APR will mean that from April 2026, a tax of 20% will apply to agricultural assets over £1 million.
From April 2026, inheritance tax relief for business and for agricultural assets would be capped at £1mn, with a new reduced rate of 20% being charged above that (rather than the standard inheritance tax rate of 40%). The tax would be payable in instalments over 10 years interest free.
As it stands, farms are almost entirely exempt from inheritance tax – thanks to two policies called Agricultural Property Relief (APR) and Business Property Relief (BPR). Farm owners have been able to use a combination of these reliefs to pass on their farmland and associated business assets, tax free.
What happens to your farm after you pass away largely depends on how it's held. If the freehold is in your sole name or jointly held as tenants in common, you can leave your share to whomever you please; while if you own it as joint tenants, your share will automatically go to the other owner or owners on your death.
The gift may qualify for Gift Hold-Over Relief, whereby the CGT can be deferred until the land is ultimately sold. In practice, it is possible that no CGT is payable on the gift and provided the donor lives 7 years, no IHT is payable either. The entire farm could be passed to the next generation with no tax liability.
When the sole owner of a property has died, the property is normally transferred to either: the person inheriting the property (known as 'the beneficiary') a third party, for example someone buying the property.
When did farmers become exempt from inheritance tax?
Currently, only around 4% of estates are liable for IHT. What are the plans for inheritance tax on farmers? Since 1984 farmers and agricultural land and business owners have been exempt from IHT, thanks to a series of tax "reliefs" that can be applied to estates.
All income earned from your agricultural business, including sales of crops and livestock, rental income from land, and income from agricultural services, is subject to income tax. You'll need to report your income and expenses on your tax return, and pay taxes on any profits you earn.
Why are farmers protesting about inheritance taxes?
Farmers in fresh inheritance tax protests as they claim 'food and environment not important to government' The farmers believe the inheritance tax changes would "decimate" the country's agricultural sector and hope ministers ditch the "devastating family farm tax".
In the case of agricultural property, relief applies in full to property held for more than two years, if farmed by the owner, but for property rented out the minimum holding period to get inheritance tax relief is seven years.
Far from “protecting the family farm”, the inheritance tax loophole on farmland, introduced in 1984, simply pushed up the price of land without improving returns to active farmers. This is because, like most agricultural subsidies, the value of the relief was capitalised into land values.
Kay Aylott. The UK government has announced a landmark reform to the Inheritance Tax (IHT) regime, fundamentally altering how individuals and trusts are taxed on their worldwide assets. From 6 April 2025, the IHT system shifted from a domicile-based approach to a residence-based regime.
The property in question must have been either occupied by the owner for the purposes of agriculture for two years prior to the gift or owned by them for seven years and occupied by someone else for the purposes of agriculture throughout that period.
From 6 April 2026, the full 100% relief from inheritance tax will be restricted to the first £1 million of combined agricultural and business property. This tax can be paid in instalments over 10 years, interest free.
What's the difference between inheritance tax and death duties?
It is the responsibility of the executor of the person's Will, or the appointed manager of their estate if no Will has been written, to make sure the amount payable is calculated correctly and paid in full. Death duties are also known as inheritance tax and are paid to the Inland Revenue (HMRC).
For more information, see Registering land or property with HM Land Registry. If the person who has died owned the property jointly with someone else, the legal ownership passes to the surviving joint owner. If the property is registered in joint names, you may simply need to notify us of the death, using form DJP.
Who is the next of kin when someone dies without a will?
Children – if they're 18 or over, your children may be considered next of kin if there is no surviving spouse or civil. Parents – your parents would be viewed as your next of kin if you have no spouse or civil partner, or any children, or if your children are under the age of 18.
Do all beneficiaries have to be paid at the same time?
– Unknown Debts: Unexpected claims against the estate can necessitate further delays in distribution. In England and Wales, it is not always possible or necessary for all beneficiaries to be paid at the same time after probate is granted.
One option favoured by many farming families is to go into partnership with one or more of their children. If you take this route, it's important to put a partnership agreement in place. It allows you to set out whether individual assets are to be treated as partnership property or not.
Can you gift to grandchildren to avoid inheritance tax?
A Potentially Exempt Transfer (PET) enables an individual to make gifts of unlimited value which will become exempt from IHT if the individual survives for a period of seven years.
The fall in income followed exceptional highs for some farm types in 2022/23. For cereal farms, following two years of exceptional highs, Farm Business Income fell by 73% to £39,400. For general cropping farms average income was 24% lower at £95,300.
When did UK farmers become exempt from inheritance tax?
Since its introduction in 1984, agricultural property relief (APR) has allowed small family farms – including land used for crops or rearing animals, as well as farm buildings, cottages and houses - to be exempt from inheritance tax.
Germany has enacted extensive tax exemptions and reliefs for agricultural, forestry or business assets, interests in a partnership or substantial shareholdings resident in Germany, in the EU or in the EEA.
