Everyone should compile wills and sort out inheritance, using trained solicitors to ensure the documents are legally sound and everything will work out as intended when the time comes. But sometimes, changes in the law can upset plans.
Few upsets can be as profound as those affecting the farming community, after the government unveiled a change to inheritance tax law. Under these rules, inheritance tax relief on farms will only be zero a value of £1 million, with any figure above that amount being charged IHT at 20 per cent, half the standard IHT rate.
This has led to widespread dismay in the framing community, where many have argued that farmers may be asset-rich but cash-poor, meaning that those who inherit family farms will be forced to sell part or all of them to meet their IHT bills.
A major rally in London saw hundreds of tractors and angry farmers descend on Whitehall, where one of the prominent figures was Jeremy Clarkson.
As it happens, Mr Clarkson has faced criticism over his past claim that he bought Diddly Squat Farm to avoid IHT, a claim he has now distanced himself from. However, it may be argued that while he would have the wealth from his journalism and TV presenter earnings to meet the tax bill, many other farmers would not.
For those wondering how they can manage inheritance matters, opinions differ. HMRC estimates fewer than 500 farms a year will be affected from 2026-27, which may beg the question of whether the revenue levels raised will be worth the trouble, especially if payments can be spread over ten years.
The Institute for Fiscal Studies (IFS) suggests the figure may be lower, due to steps people can now take.
For instance, a couple may split their personal assets to bring more property below the threshold, while more assets may be gifted seven years before death. This, of course, does come with the problem that nobody can be sure they won’t die in that time, which could leave children with the double whammy of unexpected grief and a huge IHT bill.
It may be that farmers who have written a will can benefit from seeing a solicitor to amend the details and rearrange their estate. This includes removing clauses leaving all the estate to dependents upon death and gifting it earlier instead, although the seven-year risk remains.
Not every analysis concurs with that of the IFS. The Central Association of Agricultural Valuers declared that the stated figure of 500 “has not smelt right” and presented a different picture.
Its analysis concluded that the most likely figure will be 75,000 farms in a generation, before any inflation is taken into account, which will equate to around 2,500 taxpayers in 2026-27.
While the first port of call for farmers should be their accountants, the second may have to be their solicitors. By getting the will changed and altering their arrangements for passing on property to the next generation, farmers with the right arrangement in place may just drive a large tractor through the government’s plans to hit them with this new tax burden.
