New UK farm inheritance tax rule will trigger ‘vital challenges’, say accountants

[ad_1] A brand new inheritance tax regime for UK farms and household companies comes into power on Monday and can current “vital challenges” for these affected, in line with accountants.

In October 2024 the federal government introduced plans to levy inheritance tax on farms – prompting an outcry in lots of quarters.

After months of strain from campaigners and MPs representing rural areas, ministers introduced simply earlier than Christmas 2025 that they might improve the edge for taxing inherited farmland from the unique £1m to £2.5m.

The unique announcement triggered protests across the UK, with farmers arguing it could stop lots of them from passing on their farms to their kids, and whereas the edge change was welcomed by many within the sector, the tax modifications stay controversial.

Any longer, the primary £2.5m of mixed agricultural and enterprise property will proceed to obtain 100% aid from inheritance tax, with 50% aid on quantities over £2.5m. Every individual can have a £2.5m allowance.

Elsa Littlewood, a personal consumer companion at accountancy and enterprise advisory agency BDO, stated the beginning of the brand new inheritance tax regime was “a watershed second for the farming and household enterprise group”.

She added: “Whereas there have been some vital and welcome concessions made since these new guidelines have been initially introduced, the brand new coverage is however a major departure from the earlier regime and can pose vital challenges for these companies in scope.”

Many would want to dedicate rather more time and a focus to their succession planning earlier of their lives to make sure their enterprise may very well be transferred in essentially the most environment friendly method and in a manner that gave it one of the best probability of surviving and thriving over the long run, she stated.

“The brand new regime shall be notably difficult for farm companies which can be asset-rich however cash-poor,” stated Littlewood.

“In sure circumstances it could end in beneficiaries having to dump land or belongings to pay IHT [inheritance tax] liabilities.”

The federal government beforehand stated it had listened to the considerations raised and that elevating the edge would considerably lower the variety of farms and enterprise homeowners going through greater inheritance tax payments, making certain that solely the biggest estates have been affected.