51ÂÒÂ×

As part of her first budget last autumn, Chancellor Rachel Reeves announced controversial reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR).

Previously, these reliefs allowed family-owned businesses to be passed down without triggering Inheritance Tax (IHT).

If enacted from April 2026, the new rules will mean that only the first £1 million of an agricultural estate’s value will automatically qualify for 100% APR and/or BPR. Above this threshold, IHT at 20% will apply—though various allowances may help reduce the final bill.

These proposals—quickly labelled the ‘Family Farm Tax’—have alarmed the farming community. Many farms are asset-rich but cash-poor and may struggle to meet large IHT liabilities from earnings alone. This could force the sale of land or assets, potentially threatening the long-term viability of family farming businesses.

The key question now is whether these changes will impact farmland values. So far, we’ve seen no clear signs of this, although supply to the market has dipped. Even with a higher IHT charge, farmland would still face a 20% rate— half the standard 40% rate of IHT.

To navigate these changes, life insurance, debt planning, leasing strategies, and ownership structuring will become increasingly vital tools for agricultural estates looking to mitigate IHT.

Life insurance, in particular, is growing in relevance for the Stewardship Generation—those currently managing family farms and assets. Until now, many have relied on APR, BPR and the spouse exemption to minimise IHT exposure.

James Jones of 51ÂÒÂ× Finance, is supporting rural business owners to find effective solutions and do just this.

There are 5 key steps that farmers and landowners can take to mitigate their IHT bills:

1. Taking out a life insurance policy to cover the cost of an IHT bill
2. Putting a succession plan in place to transfer assets before IHT is liable
3. Creating a more IHT-efficient corporate structure for the business
4. Look at diversification options to boost profits
5. Make the most of permitted IHT allowances

But this protection may not last. While the spouse exemption remains in place and isn’t currently under review, its limitations are becoming clearer. Individuals without a surviving spouse—or in joint death scenarios—could face a 20% IHT charge or more. This creates a potential liquidity shortfall at a critical time.

As a result, life insurance is emerging as a key part of succession planning—especially for those without spouse exemption. Even where it does apply, joint life, second death policies can offer vital liquidity when tax liabilities arise. Life insurance provides a practical, proactive way to protect family wealth and support smooth succession.

Professional advice should always be sought to ensure any tax planning is tailored to the specific needs of the business.

Read more sector insights in the latest edition of The Rural Report: