Farming and Inheritance Tax: What the 2026 Changes Mean for You

If you own or run a farm, or you’re due to inherit one, you’ve likely spent the past year hearing about inheritance tax changes. But are you clear how these changes affect you? The rules changed on 6 April 2026, and they now apply to every farming family in the country. Understanding where you stand is the first step to protecting what you and your family have built.

The rules, in plain terms

Two reliefs have long protected farms from inheritance tax: Agricultural Property Relief (APR), which covers farmland, farmhouses and buildings, and Business Property Relief (BPR), which covers assets used in a trading business such as livestock and machinery. Together they’ve allowed many farming families to pass their business to the next generation without a large tax bill.

Since 6 April 2026, that protection is more limited. You still get full relief on the first £2.5 million of qualifying APR and BPR assets. However, anything above that only gets 50% relief, which works out as an effective 20% inheritance tax charge. The £2.5 million allowance can be transferred between spouses, so if you’re married or in a civil partnership, you could pass on up to £5 million tax free between you.

What that means

£5 million might sound like a large sum, but land and property values across the South East mean it may not stretch as far as you think. A typical 300 acre working farm with modern buildings could reach that figure quite easily, even with only a modest farmhouse.

One major implication of the change concerns BPR. In the past, you only had to show that assets such as livestock, machinery and stored crops were trade assets to secure 100% relief through BPR. For the first time in decades, it will be necessary to value these assets to assess your liability to IHT. Any tenancies you hold over other farmland will also need to be valued.

Lastly, it’s worth remembering that only the agricultural value of the farmhouse qualifies for APR. HMRC will seek to argue that IHT applies to at least 30% of the value, and before that, it will question very carefully whether the house qualifies as a farmhouse for APR in the first place.

What you should be doing now

The advice from Batcheller Monkhouse’s Emer Edwards is to start with your succession plan, because everything else follows from it. Do you want to keep farming for the rest of your working life? Is there a family member ready to take over? Or are you thinking about stepping back and bringing in a tenant or contractor?

• Once you’ve thought that through, there are some practical questions worth working through with an adviser:
• Are you thinking about gifting assets to the next generation? If so, you’ll need to think about capital gains tax alongside inheritance tax.
• Who actually owns the farm, and is that ownership set out clearly in writing?
• How is the land occupied? A grazing licence or contract farming arrangement can sometimes function more like a tenancy than you’d expect.
• When was your farm last valued? Land prices across the region have more than tripled over the past 20 years, so an old valuation is likely to understate what you actually own.
• Which of your assets currently qualify for APR or BPR relief?
• How is the farmhouse occupied, and does it still qualify for APR?

The instalment option, and its limits

One concession is that farming businesses can now pay inheritance tax in ten instalments, free of interest. That gives some breathing room, but there is a catch worth knowing about: the first instalment is due within six months of death, whether or not probate has been granted. The interest free option only applies to qualifying assets too, not your whole estate, and interest starts accruing on each instalment from the date it falls due. Time is of the essence, therefore, in arranging both valuations and assessments of APR and BPR qualifying assets.

Where to start

Leo Hickish, our seasoned expert says: “We at Batcheller Monkhouse have been advising farming families on tax planning for decades. We have 15 registered valuers across the South East who can carry out Red Book valuations on all types of rural property. More importantly, we are hugely experienced in negotiating cases with both HMRC and the Valuation Office, and know the rules on APR and BPR intimately. That means you can get a clear, current picture of your assets, along with advice on where APR and BPR relief applies, where it doesn’t, and what steps you can take to improve your position.”

Annual stocktaking valuations are worth considering too. They keep your livestock, machinery, crops and chemicals properly valued year on year, so you’re not caught out when HMRC asks for a formal valuation at the date of death.

If you haven’t reviewed your position since these changes came in, now is the time.  Keep accurate, consistent records.  Get a proper handle on the value of your farm so you know what your first instalment might look like.  Review how your business is structured and be honest with yourself about your long-term goals; and talk to your professional advisers sooner rather than later. The families facing the smallest surprises are the ones who started the conversation early, rather than waiting until HMRC came asking.