Finance Act 2026:
Agricultural IHT Planning

The Finance Act 2026 caps 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) at £2.5 million per person. Above that threshold, qualifying assets only attract 50% relief — resulting in an effective IHT rate of 20% on the excess. Previously, qualifying farm assets could attract 100% relief with no cap. This is the most significant change to agricultural IHT in a generation.

From the Finance Act 2026, each individual can claim 100% APR or BPR on up to £2.5 million of qualifying agricultural or business assets. Assets above £2.5 million only attract 50% relief. For a farm worth £5 million owned by one person, the excess of £2.5 million would be taxed at 20% — an IHT bill of £500,000 (after applying the nil rate band).

Yes — but only with the right planning. Each spouse has their own £2.5 million APR/BPR allowance. However, if the farm is owned entirely by one spouse, only one allowance is available on that spouse's death. The surviving spouse's allowance is wasted. To use both allowances, the farm must be equalised between spouses — typically a 50/50 transfer — before the first death. This is an inter-spouse transfer with no IHT or CGT consequences.

Farm equalisation means transferring a share of the farm from one spouse to the other so that each holds roughly equal qualifying assets. Because transfers between spouses are exempt from IHT and CGT (on a no-gain, no-loss basis), this can be done without immediate tax cost. Once equalised, each spouse has their own £2.5 million APR/BPR allowance — potentially doubling the combined relief to £5 million.

A will trust (also called a testamentary trust) is a trust created by a will that takes effect on death. For farming couples, each will should place the farm share into a trust on the first death — rather than passing it outright to the surviving spouse. This ensures each spouse's APR/BPR allowance is used separately on each death, rather than being merged and potentially wasted.

Yes. The standard nil rate band (£325,000 per person, transferable between spouses) still applies to farm estates. It can absorb any small excess above the APR/BPR cap. For example, if a farm half-share is £2.85 million and the APR cap is £2.5 million, the excess of £350,000 (after 50% relief = £175,000 chargeable) can be covered by the nil rate band of £325,000.

A lifetime gift of farmland to children starts a 7-year clock. If the donor survives 7 years, the gift falls outside the estate entirely — and the APR/BPR allowance refreshes on death. This can be a powerful planning tool for older farmers who want to pass land to the next generation while reducing the eventual IHT bill. However, it requires careful advice on CGT and the interaction with APR.

For a farming couple with a combined estate of £6.2 million, the difference between no planning and proper planning can be £810,000 in IHT saved — on the same farm, with the same assets, and the same family. The only difference is the advice taken and the will structure put in place.

Yes. We act for farming families across Cheshire, North Wales — including Flintshire, Denbighshire, Wrexham, Conwy and Anglesey — and throughout England and Wales. We have particular experience advising on farm estates in the Cheshire and North Wales agricultural belt.