Farmers across the UK are sounding the alarm over Labour’s planned inheritance tax (IHT) changes. The uproar is impossible to ignore, and Jeremy Clarkson’s very vocal involvement has certainly raised the stakes. Not to worry – farmers know a thing or two about raising steaks.
But while protests might grab headlines, the real work for farming families starts now. The truth is that waiting for politicians to change their minds could leave you short on options. The good news? Even if the new rules take effect, there are legal ways to protect your farm’s full value for future generations.
The good news? Strategies like gifting and trusts can help shield your family from hefty tax bills, but these approaches require careful planning and enough time to implement effectively. Don’t worry – we’ll guide you through everything you need to know, step by step.
Let’s dig in and show you how Spencer Churchill can help safeguard your farm and your legacy.
What are Labour’s new inheritance tax rules?
Big changes are on the horizon for inheritance tax, and farmers are bracing for impact. Right now, Agricultural Property Relief (APR) allows farms to be passed down tax-free, no matter their value. But from April 2026, that relief will only cover the first £1 million of assets. Anything over that? Taxed at 20%.
Here’s the kicker: while many farmers are asset-rich, thanks to valuable land and equipment, they’re often cash-poor. Farming income can be unpredictable, and most families don’t have piles of cash lying around to cover a sudden tax bill. These new rules could leave families staring at six- or seven-figure liabilities they can’t pay without selling off land, property, or equipment.
For many, this could mean selling off land or assets to cover the bill, risking the future of farms that have been in families for generations. The bottom line? Planning ahead is no longer optional.
How this could impact farmers: a hypothetical
Meet Farmer Joe. He owns a £5 million family farm with land, a small shop, and a campsite to help make ends meet. Like many farmers, Joe’s profits are slim – he’s already barely bringing home the bacon for his family. (Look, it’s not our fault there are so many farm puns to choose from).
Under the current rules, Joe’s farm qualifies for Agricultural Property Relief (APR), so his child could inherit the entire £5 million tax-free. But Labour’s proposed changes tell a different story:
- The first £1 million of the farm? Tax-free.
- The remaining £4 million? Hit with a 20% tax, leaving Joe’s child with an £800,000 bill.
With little cash on hand, Joe’s family could be forced to sell land or assets just to pay up. But with the right planning – we’re not saying this is possible with every farm, especially not the larger ones – Joe could still pass down the full value of his land by mitigating the new tax laws.
How can you protect your legacy?
There’s a chance these protests may prevent the IHT changes, but farmers should know better than anyone not to put all their eggs in one basket. So what can you do now to protect yourself?
1. Gifting assets
You can transfer parts of your farm to your children during your lifetime, using annual gifting allowances and long-term strategies to reduce your taxable estate. However, the clock is ticking – gifting comes with a seven-year rule, meaning you need to survive for seven years after the gift is made to mitigate tax.
2. Trusts
Setting up a family trust can be a smart way to shield your assets from inheritance tax. Trusts allow you to pass down ownership while maintaining control, but they require careful planning to meet the strict conditions for agricultural or business property relief.
3. Diversification and structuring
Non-farming activities on your land, like a holiday cottage or farm shop, may not qualify for agricultural relief. Structuring these parts of your business differently – such as creating a limited company – can help you minimise your tax burden.
4. Act now
The key to all of these strategies is acting early. Setting up trusts or making gifts takes time, and waiting too long could leave you without options if the law changes in 2026.
Spencer Churchill can help you stay ahead
At Spencer Churchill, we know farming is more than just a living – it’s your legacy. We specialise in helping farming families with the complexities of inheritance tax, trusts, and succession planning.
Get in touch with our team today and let’s discuss how you can:
- Keep your family farm in the family, no matter what Labour’s policies bring.
- Protect your farm’s governance and ownership, so the right people stay in charge.
- Create a succession plan for a smooth transition to future generations.
The time to act is now
Protests may or may not sway Labour’s policies, but hoping for the best isn’t a strategy. Acting now gives you the best chance to safeguard your farm, even if the worst-case scenario becomes reality.
Whether it’s setting up trusts, exploring gifting strategies, or drafting agreements to protect your family business, we have the expertise to future-proof your farm. Don’t leave it to chance – reach out to Spencer Churchill today. Let’s secure your legacy before the changes take root.
