Agricultural property relief and business property relief update

The Government’s Autumn Budget introduced significant changes to Agricultural and Business Property Relief together with changes to treatment of pensions. It is worth noting that these changes are not yet law and may evolve. However, one thing is clear and that is preparing now could make all the difference.

Lucy Poole, Solicitor in Coodes’ Wills and Probate team, explains.

What’s changing and when?

The proposed changes begin as of April 2026 so you need to be ready in less than 12 months’ time. Now, it is important to consider working as a family to discuss your plans openly. Consider what you want to achieve and agree on what is possible.

As of April 2026, individuals will have a £1 million allowance on the combined value of agricultural and business property in an individual’s estate which qualifies for 100% relief. This includes property transferred on death, gifts made within seven years prior to date of death and any immediately chargeable lifetime transfers, such as property settled into trust.

Trustees will also have a £1 million allowance on the combined value of agricultural and business property settled into a relevant property trust qualifying for the 100% relief rate. From April 2027, any uncashed contribution pensions will also form part of your estate for Inheritance Tax purposes.

What you can do

We understand when it comes to farms, these changes are more than just legal or financial, they are deeply personal. Before April 2026 we encourage families to come together, talk about their goals and think carefully about what is possible.

Up-to-date valuations

While we cannot know what the proposed reforms will be, you can take action to minimise any severe disruption. Firstly, secure up-to-date valuations of your assets. This provides a solid foundation for succession planning discussions, calculating Inheritance Tax and smoother land transfers by our Commercial Team. It is important that your valuation includes a value of your land at open market and also the agricultural value. Sometimes there is no difference in these two values, however, if there is a difference, then that amount will form part of your taxable estate. Only the agricultural value is eligible for agricultural property relief.    

Look at how your land is owned

Secondly, look at how your land is owned to make use of the £1 million allowance. For example, if three farming partners are involved, it may be useful to transfer the land into all three names. The combined relief could total £3 million in allowances.

Alternatively, say the land was owned by one party, it would be important to transfer the land to their spouse, if applicable, and then their children. This would reduce the gift’s value and form part of the estate should they not survive seven years after gifting. You should also further consider the farmhouse and whether gifting a proportion of the land will affect the house qualifying for agricultural property relief.  As a side note, if you are planning on renting the land out in the future, you may lose the agricultural property relief that would have been available on your farmhouse if you had been farming the land yourself and the farmhouse was character appropriate for the size of the farm.

Gifting and transferral of assets

Consider transferring your assets into trust as this can be beneficial. Note, however, that there will be a combined £1 million allowance for trustees on the value of qualifying agricultural and business property held in relevant property trusts. You also need to consider the reporting requirements such as registering with the Trust Registration Service on an annual basis, ten-year anniversary charges and exit charges when assets leave the trust.

Further options involve gifting a proportion of your property to your children upon your death. If your estate is below the £2 million threshold, you can then make use of the Residence Nil Rate Band. Currently, the Residence Nil Rate Band is an allowance of £175,000 or the value of your share of the property, whichever is less. This option could be particularly relevant if there is a risk on second death that the estate would be valued at over £2 million as no Residence Nil Rate Band would then be available.

In terms of Wills, it may be more beneficial to prepare Discretionary Trust Wills, given the uncertainty of what will happen in the future due to these proposed changes. A Discretionary Trust Will gives your executors more flexibility to deal with your estate. It also makes use of the allowances available at the date of your death. For example, a change of Government may change the reliefs available to you. A Letter of Wishes gives guidance to your executors which can always be updated to provide more peace of mind.

Seeking professional advice

No farm or family is the same and we know the solutions are not a case of one-size-fits-all. While change can be nerve wracking and legal fees frustrating, seeking professional advice can ease some of the uncertainties. The reality is that getting informed advice now could save you considerable sums of tax in the long term. Get in touch with Lucy Poole by emailing lucy.poole@coodes.co.uk or call us on 0800 328 3282.