A serious blow to farming estates and family businesses

The government says the inheritance tax reforms to business and agricultural relief are expected to only affect around 2,000 estates each year from 2026 to 2027, with around 500 of these claiming agricultural property relief. However, that fails to recognise the fact that many estates and businesses that have been in family hands for generations are held in trust and not by individuals. Primarily, trusts have been used not as a means of avoiding tax, but to preserve farming estates, enable business continuity and prevent both from being broken up and sold off, as happened during the old days of Estate Duty, when rates were as high as 85%.

Whilst we will have to wait until early 2025 for the government’s technical consultation on how the new limited allowance will apply to trusts, if trusts are to be treated the same as individuals, the limited allowance will trigger substantial tax liabilities at the next chargeable event (i.e. death of the life tenant, tenth anniversary) and, if anti-forestalling measures apply, even if a decision is taken to wind up such trusts before 6 April 2026.

For some family run estates this move will have serious cash flow implications if land and property has to be sold to fund the tax liability. Whilst it may provide more land for new housing projects, which supports another government objective, this could have a serious impact on our countryside. Similarly, the new measures will leave those family run businesses open to take over once shares are dissipated amongst a wider number of individuals to maximise the relief. Again, this could lead to the loss of some much-loved regional brands from the market.

Perhaps I’m just being sentimental. I do appreciate funding for schools, hospitals and social care is more important than the availability of a pint of my favourite local Sussex beer. However, I reject the notion that the owners and trustees of historic farming estates and family businesses are leading the high-life and should be penalised in the same way as those who enjoy the use of private jets! Managing a farming estate or family business comes with a huge responsibility, part of which is about protecting the fabric of the UK.