Inheritance tax - the new rules

Emma Pringle, Senior Associate, Private Client

Under the new Labour government/Following the October 2024 Budget, 100% on inheritance tax on agricultural property and business assets is proposed to change from the currently unlimited amount to a maximum of £1 million (from April 2026).

The proposed change results in estates only being eligible for 100% on the first £1 million of combined business and agricultural assets and above that they will get a 50% relief on the 40% inheritance tax rate, meaning tax will effectively be charged at 20% on assets above the £1 million threshold.
As with other estates, farm, business and landowners will also be eligible for the standard inheritance tax-free allowance of £325,000 for an individual which can be applied to any assets in the estate, and an additional amount of up to £175,000 if their own residence is passed on to descendants such as a child or grandchild.

Why Will reviews are essential for farmers and business owners

The £1 million combined agricultural relief and business property relief is per farm or business owner; therefore, if estate planning is in place, up to £2 million relief could be obtained by a married couple, but only if both are still alive, able to make wills and matters are structured appropriately. As the deceased spouse’s £1 million is not transferable to the surviving spouse’s estate on their death, the surviving spouse would lose the deceased spouse’s £1 million allowance if they have not ringfenced/appropriately structured their allowance, for example by way of a trust in their will. Therefore, agricultural and business assets over £1 million (instead of potentially £2 million) could be taxed should up-to-date estate planning advice fail to be sought.

If you or someone you know needs advice, don’t hesitate to get in touch with Emma or anyone in the Private Client Team.