How the Budget Changes Affect Farmers – Insights for Advisers

As financial advisers, staying ahead of legislative changes is vital—especially those affecting inheritance tax (IHT). Recent proposed changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) are causing significant upheaval among UK farmers.

 

These shifts, set to take effect in 2026, represent a seismic change for an industry that relies on IHT exemptions to preserve generational farming operations. Here’s what you need to know to support your farming clients during this critical time. 

 

What Are the Current Rules for APR and IHT?

 

Under current rules, APR and BPR reduce IHT by 50% or 100% on qualifying farmland, livestock, and agricultural businesses. Combined with the nil-rate band (£325,000 per individual) and the residence nil-rate band (£175,000 for a family home), these reliefs allow most farming families to pass down assets with little or no tax burden. 

 

These provisions, in place since 1992, have been instrumental in helping farmers maintain their land, business continuity, and family legacy. 

 

The Proposed Changes

 

In 2026, new rules are set to disrupt this framework:

 

  • Capped APR and BPR: Reliefs will be capped at £1 million.
  • New IHT Rate: Assets exceeding the £1 million threshold which currently qualify for 100% relief from IHT will face a 50% reduction in the available relief meaning that they will be subject to an effective 20% IHT rate—lower than the standard 40% rate but still a significant new cost for many.
  • Impact on Larger Farms: High-value, low-income family farms are likely to bear the brunt of these changes, forcing some to sell off land or restructure operations to cover the tax liability.

While the government argues these changes will target the wealthiest estates, the realities for farming families paint a more concerning picture. 

 

Why Are Farmers Concerned?

 

Your clients in the agricultural sector may already be voicing concerns, and it’s crucial to understand their perspective:

 

  • Asset-Rich, Cash-Poor
    Farmland values often run into the millions, but income from farming is typically modest. The new rules may push families to sell assets to meet tax obligations, disrupting their way of life and eroding generational farming traditions.
  • Low Returns and Limited Liquidity
    With farming profitabilityin many cases as low as a 0.5% return on assets, securing financing to cover IHT will be challenging. This opens the door for large corporations or private investors to acquire family-owned farms, fundamentally altering the rural economy.
  • Short Adjustment Period
    Farmers argue the two-year timeline is unrealistic for revising succession plans and restructuring finances. Many are calling for a seven-year adjustment window to mitigate the financial shock.
  • Post-Brexit Strains
    The removal of EU subsidies has already placed strain on farming businesses. The addition of a new IHT burden feels to many like a step too far. 

 

What Are Farmers Demanding?

 

The farming community is advocating for several key policy changes:

 

  • Exemptions for Working Farms: Taxing farmland based on value alone ignores the operational realities of farming. Exemptions for active farms would preserve generational continuity.
  • Longer Transition Periods: Extending the implementation timeline would provide families with the breathing room needed to adapt.
  • Fairer Tax Targeting: Many argue that the policy unfairly burdens small and medium-sized farms while sparing large estates and corporate landowners. 

 

What This Means for Financial Advisers

 

These proposed changes underscore the importance of proactive estate planning. As a financial adviser, you can play a critical role in helping your farming clients navigate this uncertainty:

 

  • Leverage Estgro’s Capabilities
    With Estgro, you can model the IHT impact of these changes, integrate APR and BPR considerations, and recommend actionable strategies. Our seamless integration with platforms like Intelliflo ensures a holistic approach to estate planning.
  • Plan for the Eventual Tax Liability
    By raising the issue of eventual IHT liability with your clients early on, you can help them achieve a strategy for minimising the impact on the next generation when the time comes, be that through proactive debt financing (for example mortgages) gifting strategies early on when the chance of surviving is more than 7 years (making the transferred assets IHT exempt) and life insurance to cover potential tax exposure.
  • Engage with the Next Generation
    These changes are a crucial opportunity to connect with beneficiaries. By establishing yourself as a family adviser, you can strengthen long-term client relationships and ensure continuity of wealth planning across generations. 

 

Empowering Farmers Amidst Change 

As we approach 2026, financial advisers are in a unique position to mitigate the impact of these IHT changes on farming clients. Through robust planning, education, and the right tools—like Estgro—you can safeguard your clients’ legacies while adapting to the evolving regulatory landscape.

 

Estgro is here to help. Book a demo to learn how our platform can empower you to deliver seamless, informed estate planning solutions for your agricultural clients. Together, we can help farming families protect their heritage and thrive despite the challenges ahead.