Knowing where you stand is key for agricultural businesses navigating IHT changes

“In this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin 

The inheritance tax (IHT) changes scheduled to be introduced in April 2026 are far reaching and of concern to all business owners, but none more so than those in the agricultural industry. With high capital values and low returns, the effect of the taxes as proposed could prove ruinous to many farming businesses when the current owner(s) pass away. That said, with planning and preparation, mitigations may be able to be implemented for many – but not all. 

On a positive note, these changes are forcing conversations within farming businesses around succession planning which up until now were often put in the “too difficult” pile and parked for another day. Now, with the looming spectre of IHT potentially being chargeable on business and agricultural assets, it is time for action. 

So where do you start? The value of the assets in question, remembering to offset any debt, is key. Having a valuation carried out is a good start as this will determine the tax exposure in the end. As part of that exercise, it is extremely important to fully understand the composition of the assets, the ownership of them, and the risk profile for each of the individuals. None of us has a crystal ball but with a bit of foresight, certain outcomes can be anticipated.

In any family business it is important to remember that tax should not be the driver for otherwise unplanned business changes, although it may well be the accelerator. 

There has been a lot of discussion in the industry around gifting in life and making full use of personal allowances available to individuals by way of their personal nil rate band, as well as the additional exemption of up to £1m for agricultural and business property reliefs. With this in mind, it may be that some lifetime gifting is advisable, though to what extent will depend on individual circumstances.

Our top piece advice before you take any decision is to know where you stand. Having a full audit of your current situation carried out to glean information on ownership and tenancy interests, partnership make up and agreements, limited company governance and shareholdings, and any diversified or potential development projects is essential. Only when all that information has been collated can it be ascertained what the likely IHT exposure of the various parties is likely to be, and informed decisions made. 

It may seem obvious, but very frequently we find that things are not as they seem. 

For example, the ownership of land may actually be held by an individual or individuals where it was thought to be owned by the partnership. Alternatively, it could the other way around where it is thought that the property is owned by an individual, but the farmland and buildings may have been introduced to the partnership accounts as an asset of the partnership. In this latter case, in the event of a death, the farm would be accounted for through the partnership accounts. 

The partnership accounts may have debt to offset against these assets and we may also find that the capital interest in the partnership assets is not reflective of the original position. Not only does this mean that what was thought to be the value of the estate of that individual is not as anticipated, it can also make specific gifting of assets or bequest of specific parts of a property problematic and sometimes impossible to deliver.  

Our team of rural and agricultural specialists is experienced in “getting under the skin” of the business and making sure that plans can be made secure in the knowledge that they can be delivered. Please get in touch if we can be of assistance.

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