Inheritance tax reform – a tipping point for family farms?

As Parliament winds down for the summer recess, the question on many minds is: will the government be for turning?  Judging by the current political turbulence and the looming break, a U-turn on the proposed Agricultural Property Relief (APR) and Business Property Relief (BPR) changes seems unlikely.

What’s striking is the silence from ministers on the CBI Economics analysis suggesting that the proposed Inheritance Tax (IHT) reforms could cost the UK economy £14.9 billion and 200,000 jobs over the next five years. This is in stark contrast to the government’s own estimate that the APR and BPR changes would raise just £0.5 billion in revenue per year, a figure that now appears dwarfed by the potential economic fallout.

Assuming no reversal and no major revisions in the Autumn Budget, we must prepare for a new reality. The proposed changes represent a paradigm shift in succession planning for farming families:

• From passive to proactive: The old regime allowed for conservative, often last-minute planning. The new rules demand early action, assets must be passed down during the lifetime of the current generation.
• Engaging the next generation: There are upsides. Younger family members becoming owners earlier can foster a stronger sense of responsibility and long-term thinking.
• Transparency is key: This shift requires openness within families about wealth, intentions, and expectations. Gifting becomes central but so does solving the perennial “GROB” (Gift with Reservation of Benefit) problem.
• Rethinking priorities: The traditional balance between farming and non-farming children may need to tilt toward securing the retirement of the older generation. The “retirement pot” becomes paramount.
• A repeating cycle: Succession isn’t a one-off event. The next generation will face the same challenges, and planning must be cyclical and continuous.
• Profitability under pressure: Is the farm business resilient enough to support multiple generations while absorbing new tax burdens? For some, the answer may be no.
• Market signals: We’re already seeing more farmland on the market than usual. For some, this is an existential threat. For others, it’s an opportunity. The market is shifting and fast.
• Legal safeguards: Nuptial agreements are back in focus, not just because of recent Supreme Court rulings, but because transferring assets earlier increases exposure to life’s uncertainties, including divorce.
• Holistic planning: Wills, trusts, and business structures must be aligned across generations. Synchronisation is essential to preserve continuity and purpose.
• Insurance as a tool: More families are turning to insurance to cover the risk of seven-year gifts. It’s often more affordable than expected and can be structured to spread the cost. 

In short, the proposed IHT reforms are not just a tax tweak, they are a ideological shift in how farming families must think about succession, security, and sustainability. Whether this is a threat, or an opportunity depends on how early and how well families prepare.