Significant inheritance tax changes are coming into effect from 6 April 2026 that will affect farmers and rural business owners.
The changes are in relation to the reduction of availability of Agricultural Property Relief (APR) and Business Property Relief (BPR) in relation to Inheritance Tax payable on lifetime gifting and on death.
Our Agriculture Lawyers explore what is changing and what farmers and rural business owners must do to protect inherited and generational wealth.
How APR and BPR Currently Work
Currently, where a person owns qualifying business or agricultural assets for the requisite period, those assets can benefit from a relief (APR or BPR) from Inheritance Tax at 100% or 50% depending on the type of asset and this relief can apply to an unlimited value of assets.
What Is Changing in 2026?
The main incoming change entails capping the availability of the 100% APR and BPR. Instead of being unlimited, there will be a £2.5 million cap on qualifying business and agricultural assets combined.
If the qualifying assets exceed the £2.5 million cap, you will only get 50% relief and inheritance tax will be payable at an effective rate of 20% on the excess value.
These changes could have significant consequences for farms and businesses valued over £2.5 million.
Why Farmers and Business Owners Must Act Now
Farmers and Business Owners need urgent tax planning advice to mitigate the risk of an increased tax burden after April 2026.
That advice may well include succession planning and gifting assets to younger members of the family in order to protect the future of the Farm or Business.
The Role of Lifetime Gifting
You may be able to make gifts every 7 years, which, if you survive 7 years after making the gift, could avoid a tax charge.
Whilst this may save tax, benefit younger family members, and retain the Farm or Business intact for future generations, there is a risk that these gifts may be subject to litigation in the event of future divorce brought by the spouse of the younger family member who has received gifts as part of tax planning advice received by parents.
To protect the prospect of an unwelcome challenge in the Family Court, it is beneficial for the family member(s) who have received the gift to enter into a nuptial agreement with their spouse or intended spouse, to ringfence those gifts in the event of marriage breakdown.
For inherited farms which have been passed down through generations and are expected to be passed down to future generations, a court is more likely to ring-fence the farm from asset division as a ‘non-matrimonial’ asset.
However, it is crucial to be aware that needs trump all, and if either party or the children of the parties do not have financial provision to meet their needs, then the farm and its assets may be invaded and divided to meet those needs.
How to protect inherited and generational wealth?
Pre-nuptial and Post-Nuptial Agreements
Pre-nuptial and post-nuptial agreements serve as effective tools for protecting inherited wealth and avoiding the risk of forced asset division on divorce. These agreements are used to clarify ownership of assets in the event of divorce.
Some common and important clauses for farming families in nuptial agreements include:
- Separate Property – a clause explicitly stating that a family farm and its assets are separate property and are not subject to division on divorce.
- Ownership – a clause clarifying the ownership of the farm and any assets, i.e., listing the specific entity (whether a corporation, LLC or partnership) and the number of shares or percentage of ownership.
- Management – a clause specifying who will manage the farm and make operational decisions.
- Exclusion of Contributions – a clause which confirms that even if one party contributes to the maintenance, improvement or running of the farm, this will not make the farm a matrimonial asset subject to division on divorce.
- Succession – a clause specifying inheritance provisions for how the farm is to be passed down generations to ensure the farm remains within the family and is not lost through divorce.
Considering the imminent budget reforms, those in the farming industry must seek proper legal advice on nuptial agreements. It is also important for those with nuptial agreements already in place to review and update these in light of the changes to tax and family circumstances.
The best practice for obtaining a nuptial agreement is to obtain full and frank financial disclosure from both parties and independent legal advice, with regular reviews.
Contact Our Agriculture Team
It is crucial that those affected by the imminent budget reforms obtain coordinated advice from Myerson’s Family, Agricultural, Corporate and Private Client teams to safeguard the financial well-being of rural families and business owners.
0161 941 4000
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Brittany Rodwell
Solicitor
Brittany is a Solicitor in our Family Team, with a particular interest in divorce and financial remedy proceedings.
Brittany qualified and joined the family team in September 2025 after completing her training contract at a Manchester City Centre firm in a Tier 1-ranked family team specialising in High Net Worth divorce and finances. She graduated from the University of Manchester in 2021 with a First Class Honours in Law and achieved a Distinction in the LPC with an integrated Master's at BPP University.
Brittany has experience with cases involving high net worth divorce and financial remedy proceedings often involving trusts, business assets, and pensions.
Brittany has experience with jurisdiction disputes, cohabitation agreements and pre-nuptial agreements and supporting clients with non-molestation orders, occupation orders and children matters.
She is a member of Resolution and is committed to resolving issues in family law disputes constructively and amicably.
About Brittany Rodwell