Commentary on Changes to the “Family Farm Tax”

After intensive campaigning by both the Country Land Owners Association (“the CLA”) and the National Farmers Union (“the NFU”)  the Government announced an early Christmas present for farmers.

At last, they changed their minds and increased the relief allowance from £1M to £2.5M for individuals and £5M for couples. Taken together with the fact that in the November budget the Government also reversed its position regarding the allowance being non-transferable between spouses, many farmers and landowners will be sitting back thinking that there is now nothing that they need to do.

That may well be the case for smaller farms however given land values, many will still have assets that exceed the £2.5M or the joint £5M. In addition, it should be remembered that:

• These allowances are combined for both Agricultural Property Relief (“APR”) and Business Property Relief (“BPR”), which means it is not just land which needs to be valued and taken into account but also any business assets, farm machinery, livestock, and other diversified business assets.
• If a farmer is single, they cannot take advantage of the £5M allowance.
• In addition, their spouse will need to own some agricultural or business assets to take advantage of the combined relief.
• According to the Chartered Institute Of Taxation (“CIOT”) comments published on the 15^th September 2025 on the draft legislation (the Finance Bill 2025-26) the allowance is apportioned across all relievable property. Therefore, on that basis a legacy in a will of £2.5 M of relievable property representing 20% of the total relievable property would only give 20% of the relief rather than the full £2.5M. In other words, the relief is spread, and no specific property attracts the full 100% allowance.
• It should also not be forgotten that if the deceased has made lifetime gifts (Potentially Exempt Transfers) or “PETS” unless the deceased has lived for the full 7 years following the gift then those gifts will fall back into the estate of the deceased and will form part of the relievable property (subject to taper relief after 3 years).

The Committee of the whole House of Commons has now debated and agreed various provisions of the Finance Bill 2026 on the 12^th and 13^th January 2026, amongst the points debated were the limits on APR and BPR. The government’s proposed amendments to the provisions relating to agricultural and business property relief were agreed and so now at least we have some certainty.

Where farmers have already undertaken some tax planning and made new wills prior to the draft legislation being published and prior to these pre-Christmas changes being made which will now need to be reviewed.

Therefore, the message is that farmers cannot necessarily sit back and assume that all is well.  Professional advice should be taken to ensure that everything that needs to be done has been done before the 6^th April 2026.