Passing on a farm after death: What farming families need to know now
By Robert Blair, Partner and ARA specialist
The 6 April 2026 reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) are finally here and represent the most significant change to farm succession planning in decades.
For families who have relied on these reliefs to pass on their holding to the next generation without a large Inheritance Tax bill, the new rules require careful attention.
However, there are a broad range of considerations that should be considered when passing on the family farm.
What has changed
Under the previous rules, qualifying agricultural and business property could attract 100 per cent Inheritance Tax relief with no upper limit on value. From 6 April 2026, that unlimited relief has been capped.
Each individual now has a combined allowance of £2.5 million for assets qualifying for 100 per cent APR and BPR.
Any qualifying assets above that threshold receive relief at 50per cent rather than 100 per cent, leaving the excess potentially subject to Inheritance Tax at an effective rate of 20 per cent.
For married couples and civil partners, the position is more favourable. Unused allowance can now be transferred between spouses, including where the first death occurred before 6 April 2026, meaning a couple can potentially pass on up to £5 million of qualifying agricultural and business assets between them before reaching the 20per cent rate.
Combined with the standard nil rate band and residence nil rate band (which can also be transferred), the total threshold for a couple is up to £6 million, depending on their circumstances.
HMRC currently estimates that around 185 estates with agricultural property claims will pay more Inheritance Tax in 2026-27 as a result of these changes. This accounts for around 15 per cent of all estates claiming APR.
The majority of smaller family farms are expected to remain unaffected, but any farm with significant land values should review their position.
Why the change matters for many farming families
The critical point is that farmland values have risen substantially over the past decade. A modest holding that might once have fallen comfortably within the relief threshold may now exceed it.
A farm of 400 acres of arable land, valued at current market prices, could easily have an agricultural value above £2.5 million on its own, before any other business or residential assets are taken into account.
The government’s position is that most family farms will be protected by the £2.5 million allowance and transferability between spouses.
However, for farms that exceed these thresholds, the liability could be substantial and unlike many other taxes, Inheritance Tax often falls due at a time when the family is least able to plan around it.
Farming businesses are often asset rich, but cash poor. The illiquid nature of farming businesses mean that settling an urgent Inheritance Tax bill isn’t simple.
Probate and the practical challenges
Beyond the tax position, the sale or transfer of a farm following a death brings a range of practical complications.
Agricultural property can be difficult to value. Land and buildings may have multiple uses and tenancy arrangements can significantly affect both value and relief eligibility.
Where APR applies, the relief is based on the agricultural value of the land, which may be lower than its open market value if, for example, the land could attract premium bids from non-farming buyers or has development potential.
The difference between agricultural value and market value is known as ‘hope value’ and does not attract APR, which can create unexpected liabilities.
Probate valuations for agricultural estates require specialist input. Errors in valuing land, livestock, machinery or business interests can expose the estate to penalties or challenge by HMRC.
Steps to take now
The most important action for any farming family is to review their position in light of the new rules. This means:
- Reviewing existing wills and trusts to ensure they remain appropriate under the new framework.
- Assessing the likely combined value of agricultural and business assets against the new £2.5 million allowance.
- Considering whether lifetime planning, including gifts, trusts or restructuring of ownership, could reduce future exposure.
- Understanding the interaction between APR, BPR and other reliefs, particularly where farms have diversified or where property is held in different ways.
- Taking specialist tax and legal advice at the earliest opportunity, particularly where the farm is likely to exceed the threshold.
The changes are now in effect, but the window for proactive planning has not closed. Acting early provides more options.
If you would like to discuss how this may affect your farming business, the Moore Thompson ARA team would be happy to help. Please contact us at 01775 711333.