The secret family farm tax workaround every farmer should know

£11,000. That was the average sale price of arable land in 2024, based on Strutt & Parker’s Farmland Database (a detailed record of land sales dating back to 1996, which gives a valuable insight into the past, present and future of the UK farmland market). Their latest analysis showed that the average sale price of arable land per acre in the first half of 2024 was £11,000, which is close to record levels.  

High arable land prices should be good news for farmers. But changes to Agricultural Property Relief and Business Property Relief from 6 April 2026 could still affect farming estates with more than £2.5 million of combined qualifying agricultural and business assets.

Key takeaways

• Agricultural Property Relief can reduce the value of qualifying farmland and agricultural property when calculating Inheritance Tax.
• From 6 April 2026, 100% Agricultural Property Relief and Business Property Relief is limited to the first £2.5 million of combined qualifying assets per estate.
• Qualifying agricultural and business property above the £2.5 million allowance can receive 50% relief, resulting in an effective Inheritance Tax rate of up to 20%.
• Whole of Life insurance may help provide beneficiaries with funds towards an Inheritance Tax bill, but it does not reduce the taxable value of the farm itself.
• Farmers should review ownership, succession plans, wills, pension arrangements and protection with appropriately qualified financial, tax and legal advisers.

Speak to our team about protecting your family farm

Concerned about how the Agricultural Property Relief changes could affect your farm and succession plans? Our team can help you review your protection and inheritance planning options.

Call our team on 0118 916 5480 or send us a message.

What recent changes have been made to Inheritance Tax for farmers?

Agricultural Property Relief and Business Property Relief have historically allowed qualifying agricultural land, buildings and business assets to receive up to 100% relief from Inheritance Tax, provided the relevant conditions are met.

From 6 April 2026, 100% Agricultural Property Relief and Business Property Relief is limited to the first £2.5 million of combined qualifying agricultural and business property. Qualifying value above this level receives 50% relief, resulting in an effective Inheritance Tax rate of up to 20%.

The new rules mean that an estate can receive 100% relief on up to £2.5 million of combined qualifying agricultural and business property. Qualifying value above this amount receives 50% relief. Any unused portion of the £2.5 million allowance may be transferred between spouses or civil partners, potentially allowing a couple to pass on up to £5 million of qualifying agricultural and business property with 100% relief, in addition to any other available Inheritance Tax allowances.

What is Agricultural Property Relief?

Agricultural Property Relief can reduce the agricultural value of qualifying farmland and property when calculating Inheritance Tax. Depending on the property and circumstances, relief may be available at 100% or 50%. It applies to qualifying agricultural value rather than automatically covering every asset or the full market value of an estate.

What are the best ways for farmers to reduce Inheritance Tax?

There is no single strategy that will allow every farmer to avoid Inheritance Tax. The right approach will depend on the value of the farm, how the assets are owned, the family’s succession plans and whether the relevant conditions for Agricultural Property Relief or Business Property Relief are met.

Farmers may wish to consider:

• Reviewing how farmland, buildings and business assets are owned
• Confirming which assets may qualify for Agricultural Property Relief or Business Property Relief
• Updating wills and farm succession plans
• Considering lifetime gifting where appropriate
• Reviewing partnership, company and trust arrangements
• Assessing whether Whole of Life insurance could help beneficiaries fund a future Inheritance Tax liability
• Taking coordinated financial, tax and legal advice before making changes

Any decision should also take account of retirement income, control of the farm, affordability and the needs of the next generation.

Can Whole of Life insurance help farmers with an Inheritance Tax bill?

If you’re a farmer and you’re worried about the implications of the new family farm tax for your family and the next generation of farmers, Whole of Life insurance may be one way to help beneficiaries fund a future IHT liability.  

The big idea… 

A Whole of Life assurance policy, sometimes called Whole of Life cover, or Whole of Life Insurance is an insurance policy that pays out when you die, regardless of how old you are.  

But, here’s the important thing. Whole of Life policies can be written in trust. Which means the payout to your beneficiaries falls outside of your estate and is exempt from Inheritance Tax. The ‘workaround’ is that you buy a Whole of Life policy to pre-emptively fund the IHT bill your beneficiaries will get when you die. Your beneficiaries receive a tax-free payout that they can use to pay the Inheritance Tax due on the farmland and assets they will inherit. Which ultimately means your family won’t be forced to sell land or assets to pay the IHT bill and keep your farm going.  

What is a Whole of Life Insurance policy? 

A Whole of Life policy does what it says on the tin; it’s a policy that’s set up for an individual’s lifetime. It’s different to a traditional Life Insurance policy which has a set term and expires at a certain age. A Whole of Life policy can also be taken out up to the day before your 89th birthday.   

Whole of Life policies are open-ended and will pay out a guaranteed amount of money whenever you die. So, whereas traditional Life Insurance policies tend to be used to protect a specific debt or financial risk, a Whole of Life policy is perfect for passing on lump sums. These lump sums could be used to fund IHT bills that your family might not otherwise be able to afford. 

So, what now? 

 If you’re a farmer and you’re concerned about the impact of the new family farm tax, ask us about Whole of Life Insurance and the family farm tax workaround.  

 Using a broker like Macbeth means you’ll also get the best possible price for your insurance, because we have access to the whole insurance market.  

Review how the new rules could affect your family farm? Email or call Simon Claxton today.

Please note: Estate Planning is not regulated by the Financial Conduct Authority.

FAQs

Can Agricultural Property Relief reduce Inheritance Tax on farmland?

Yes. Agricultural Property Relief can reduce the agricultural value of qualifying farmland and property when calculating Inheritance Tax. The level of relief depends on the property, ownership and qualifying conditions.

How does Inheritance Tax affect farmers and their farms?

Inheritance Tax may become payable where the taxable value of a farming estate exceeds the available reliefs, exemptions and allowances. This can create liquidity pressure where wealth is tied up in land, buildings, machinery or livestock rather than cash.

What recent changes have been made to Inheritance Tax for farmers?

From 6 April 2026, 100% Agricultural Property Relief and Business Property Relief is limited to the first £2.5 million of combined qualifying assets per estate. Qualifying value above this receives 50% relief.

Can farmers avoid Inheritance Tax?

There is no general loophole that removes Inheritance Tax from all farming estates. Farmers may be able to reduce the liability through available reliefs, succession planning, gifting, ownership restructuring and suitable protection, subject to professional advice.

Can Whole of Life insurance protect a family farm?

Whole of Life insurance does not reduce the taxable value of the farm. However, when suitably arranged, it may provide beneficiaries with funds that can help meet an Inheritance Tax liability and reduce the need to sell assets.