The Agriculture and Horticulture Development Board (AHDB) has stated that conversations around succession planning will be vital, following changes to APR and BPR relief in the autumn budget.
The Chancellor announced that 100% relief would be limited to the first £1m of value from April 2026. Any assets beyond that value will be taxed at 20%, meaning the average farm with a £2.2m holding value would be required to pay £240,000 in inheritance tax over ten years.
Sarah Baker, AHDB head of economics, said: “These changes may encourage farmers to think about succession earlier than they would otherwise. For example, there is a seven-year rule which applies in the case of land transfers. This means that any land gifted to an individual will be free of inheritance tax after seven years. Basically, the benefactor must live for seven years or more after gifting the land”.
Farming budget cut in real terms
Analysis of the £2.4b farming budget suggests that the real value of this has been reduced by inflation, with business costs increasing on average by 44% since 2019.
Farmers may therefore be reluctant, or unable, to increase borrowing, or invest in the range of options designed to meet environmental schemes. In fact, the AHDB suggests that they may need to sell assets or reduce productivity to support financial viability.
AHDB economics and analysis director, David Eudall, says “The other consequence of the budget measures is that farm businesses will have to carefully consider operating and investment decisions, as these affect the value of the business and therefore have inheritance tax implications.
“This is of particular concern to us if there is a knock-on impact on agricultural productivity and therefore reduces our levy payer’s resilience to market shocks. We are also conscious there may be unintended consequences on self-sufficiency and food security.”