How could Inheritance Tax changes affect our favourite farming community on Radio 4 show The Archers?
The Government’s inheritance tax raid on family farms has been much publicised and even saw tens of thousands of members of the farming community protesting at Whitehall.
The changes, announced by Chancellor Rachel Reeves as part of Budget in October, means families will be stung by inheritance tax on their farm’s value above £1m from April 6 next year.
This could mean Ambridge families facing bills of up to £2.5m under the Chancellor’s plan.
Stephanie Chung, associate solicitor in the Wills, Trusts and Probate Team at Wake Smith Solicitors in Sheffield, specialises in estate management and planning and looks at the issue.
“Significant changes to Inheritance Tax (IHT) have caused worry and fear among the farming community.
“Farmers presently qualify for 100% business property relief (BPR) or agricultural property relief (APR). This will change from 6 April 2026, as the aggregate of these reliefs will now be subject to an allowance tax-free of £1m per person. Anything in excess of £1m will only be given 50% IHT relief being. For example, a person owning £3 million of property and partnership capital will get 100% relief on the first £1 million and 50% relief on the other £2 million. This means £2 million exempt and £1 million subject to IHT.
“The reforms have been criticised as they do appear to factor in the fact, that for farms to be sustainable you need a lot of land, and a lot of farms continue to be run under an informal family partnership. As a result, much of the value of farms and businesses may be subject to an effective IHT rate of up to 20%.
“Furthermore, whilst the current nil rate band and residence nil rate band allowances will continue to be transferable between spouses, unfortunately, the new £1 million APR and BPR limit cannot be passed to the surviving spouse. This means that any wills that leave all assets to the survivor may no longer be as tax-efficient.
“To qualify for APR, the land has to be owned for two years if farmed in-hand, or seven years if rented out. The property has to be used for agricultural purposes to qualify for APR, and non-agricultural value does not qualify for APR. For BPR, the partnership or company has to have been trading for at least two years.
In the context of the fictional farming community in the Archers radio show, the reforms could have a far reaching impact on the families.
Tony and Pat Archer, operate a working organic farm known as Bridge Farm. The whole family is involved, Tony and Pat and their children Helen and Tom. Their 140-acre farm should qualify for some APR, but this will be capped.
The Archers' family farm, Brookfield is a 469 acres mixed farming farm which has been passed down the generations from Dan, the original farmer, to his son Phil and is now co-owned by Phil and Jill's four children David, Shula, Kenton, and Elizabeth under a limited company. The farm was valued at £1.5m in 2000 and will likely have increased in value. BPR and APR reliefs will apply, but in comparison to previous years will be significantly reduced.
Grange Farm is owned by Oliver Sterling, who recently sold 10 acres of his 50 acre farm to finance further work. The farm is tenanted by the Grundy family. To qualify for APR, Oliver will need to have owned it for at least seven years, if he has not farmed it himself.
Home Farm is a 1,922-acre farm, by far the largest in Ambridge, owned by Brian Aldridge and his late wife Jennifer. The Aldridges have a blended family with two children born into the marriage, a child born out of the marriage, as well as adult children from previous relationships. Navigating family dynamics may be challenging and careful planning will be required to manage everyone’s expectations.
Options the residents of Ambridge may like to consider include:
- obtaining Life insurance to cover potential IHT liability
- making lifetime gifts of farming and business assets and electing to hold over any gain
- widening farming partnerships so that the ownership of the farming partnerships are spread more widely across multiple family members
- incorporation of the family farming business
- creating trusts.
If the residents decide not to do any planning, there is also the option of negotiating with HMRC to pay IHT by instalments.
For professional advice about estate management and Wills please contact Stephanie Chung at Wake Smith Solicitors on 0114 224 2114 or email [email protected]
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