Alexandra Chambers, wills, trust and tax associate solicitor at Aaron & Partners, outlines steps that growers and farmers can take following the Chancellor’s unpopular Budget announcements
Sweeping changes announced in the Chancellor’s Budget on 30 October have put new pressures on farmers and landowners looking to pass on their estates.
The revised Inheritance Tax (IHT) rules revealed by Rachel Reeves mean that farming families could face larger tax bills, potentially forcing the sale of parts of their land to cover these costs. This is particularly worrying for those who have spent generations building and maintaining their assets – and is a real threat to so many in the sector.
To protect their family’s legacy, farmers must be proactive and consider strategies that can help reduce their tax burden now. Below, we will outline five key steps farmers can take now to plan ahead, ensuring that their operations remain intact and ready for the next generation.
1. Consider the use of trusts
Trusts can help farmers reduce the IHT liability on their estates while keeping assets in the family. A trust can reduce the value of an estate and this in turn can affect the IHT bill. The thought of setting up a trust can be daunting, but a specialist advisor would be able to talk through your circumstances to determine whether a trust is right for you and will ensure any trusts are set up correctly and the implications are understood.
2. Asset transfers
The current rules surrounding gifts were not changed by the Chancellor in the Autumn Budget. Making lifetime gifts can reduce an estate’s taxable value over time, easing the IHT burden. Starting these transfers early and understanding the seven-year rule, which can exempt gifts from IHT after seven years, is crucial for effective planning. Careful consideration must also be given to the timing of lifetime gifts and the setting up of trusts as outlined above.
3. Explore all avenues
There are other options available such as considering life insurance policies, the use of companies and considering the partnership in place. However, each family is unique and professional guidance is required to understand the options available for you and your loved ones.
4. Regularly review and adapt plans
Your estate planning should be regularly reviewed to adapt to changes in the law and your family circumstances. It is important to keep your affairs under review to ensure your plan remains effective and aligned with current needs, allowing farmers and landowners to safeguard their assets.
5. Seek professional estate planning guidance
IHT can be complex for farmers with assets tied up in land and equipment, making professional estate planning essential. Expert advisors can maximise reliefs like Agricultural Property Relief (APR) and Business Property Relief (BPR) to reduce your IHT exposure.
For those who haven’t, starting the estate planning process now is vital. Tailored advice and early planning help protect assets and preserve your family legacy for future generations.
