Inheritance Tax Changes: How The Budget Impacts Family Farms

In what the NFU has described as a ‘Budget blow for British farming’, the Chancellor’s Autumn Budget has brought in several measures which impact farms in Wales and England.

The changes have caused much debate within the agricultural industry, and the NFU is holding a mass lobby of MPs on 19th November to highlight how these changes could have a devastating impact on British farms.

In this blog, Sean Boucher, Director and Head of Lifetime Planning - West Wales, explains what the new Inheritance Tax laws for Agricultural Property Relief means for family-owned farms in Wales.

What has changed?

New measures announced in the Budget include changes to Agricultural Property Relief, which will come into effect in April 2026.

Previously, Agricultural Property Relief (APR) provided a tax relief for any land and property used for agricultural purposes, making that land exempt from paying inheritance tax when the property is passed down to the next generation. This made it feasible for younger generations to take over a family farm, as they were not faced with tax bills upon inheritance.

However, the changes to APR will mean that farmers inheriting agricultural land and property will have to pay tax on any assets worth over £1million (after using their available Nil Rate Bands). Agricultural Property Relief will remain in place for the first £1million worth of assets and farmers will be able to claim their nil rate band, being  £325,000 for individuals and £650,000 for married couples, as this is the standard inheritance tax threshold. Then, a further tax relief will be in place for 50% of the usual tax figure of 40% over that figure.

What does this mean for family farms?

Let’s use an example. Mr and Mrs Evans own a farm in Carmarthenshire worth £3million, including the value of the live and dead stock, and they plan to leave it to their daughter to take over and continue the family business. Assuming there are no other assets outside of the farm, and on the first of Mr and Mrs Evans to die, their Will leaves everything to the survivor, when Miss Evans inherits the farm she will be able to use the normal Nil Rate Band of £650,000, and then apply 100% relief on the first £1million of agricultural and business assets. The balance, being £1.350million, will face a tax bill of £270,000 as this is 20% of the property and business asset value above the £1.650million threshold.

This is likely to cause financial strain as Miss Evans is not actually selling the farm, she is keeping it to continue farming the land, and so she will have to “find” £270,000.

The most likely way Miss Evans would fund this would be to sell the land to someone else, breaking up a farm that may have been in her family for generations and consequently impacting her ability to make a living as the farm’s size has decreased.

The NFU stated: “It is clear the government does not understand that family farms are not only small farms, and that just because a farm is a valuable asset it doesn’t mean those who work it are wealthy.”

How can we keep our family farm together?

One option to protect your farm from being sold off to pay Inheritance Tax is to put in place a long-term succession plan, which may involve the use of Trusts or transferring ownership to the next generation earlier. Changing your Will so that part of the farm is passed down on first death, ensuring the first to die’s £1m threshold is utilised, is also likely to become more common. It is essential that farmers meet with their professional advisors to get a plan in place well before these rules are implemented in April 2026.

If you have concerns about succession planning for your farm, contact Sean Boucher on 03333 208644 or email hello@jcpsolicitors.co.uk