As solicitors at Blackstone Solicitors, we understand that the recent changes to inheritance tax, often referred to as the “Tractor Tax,” have caused quite a stir in the farming community. We’re here to help you understand what these changes mean for your family farm and how you can plan effectively to minimise the impact on your inheritance planning. Let’s delve into the details.
Please click here to find out more about our Private Client services
Free Initial Telephone Discussion
For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of Trusts and Wills and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
What is the “Tractor Tax”?
The “Tractor Tax” is a colloquial term for the recent changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) announced in the Autumn Budget 2024. These changes are set to come into effect from 6 April 2026 and aim to cap the relief available on agricultural and business property, which could significantly affect the inheritance tax (IHT) liabilities for many farming families.
Understanding Agricultural Property Relief (APR)
Agricultural Property Relief is a form of IHT relief that allows farmers to pass on their agricultural property without incurring a hefty tax bill. Under the current rules, if your property qualifies, you can get up to 100% relief on the agricultural value of your property. This means that if your farm meets the criteria, it can be passed on to your heirs without any IHT, or with a significantly reduced tax bill.
Key Changes to APR and BPR
The recent changes introduce several key modifications to APR and BPR that could impact your inheritance planning:
- Relief Cap
The most significant change is the introduction of a cap on the amount of relief available. From April 2026, the 100% relief will only apply to the first £1 million of the agricultural value of your property. Any value above this threshold will receive 50% relief, and the remaining value will be subject to IHT at a rate of 20%
- Combined Allowance
The £1 million cap applies to the combined value of agricultural and business property. This means if you have business assets that qualify for Business Property Relief (BPR), they will count towards the £1 million limit
- Non-Transferable Allowance
The £1 million allowance is not transferable between spouses or civil partners. Each person has their own £1 million limit, so careful planning is needed to ensure no allowance is wasted
Impact on Your Family Farm
These changes mean that many farming families will need to rethink their inheritance planning. If your farm is worth more than £1 million, you could be facing a significant IHT bill when you pass it on to your heirs. Here’s an example to illustrate the impact:
Let’s say your farm is valued at £4 million. Under the new rules, the first £1 million would be exempt from IHT. Of the remaining £3 million, 50% would be exempt, leaving £1.5 million subject to IHT at 20%. This means your heirs would face a tax bill of £300,000
Steps to Mitigate the Impact
Given these changes, it’s more important than ever to plan ahead. Here are some steps you might consider to mitigate the impact of the “Tractor Tax”:
- Review Your Estate Plan
Ensure your current estate plan takes the new rules into account. This might involve updating your will or setting up trusts to help manage the tax burden.
- Consider Gifting
If you’re in a position to do so, consider gifting some of your property during your lifetime. This can help reduce the value of your estate and potentially lower the IHT bill. Remember, gifts made more than seven years before your death are generally exempt from IHT.
- Utilise Trusts
Trusts can be an effective way to manage your estate and reduce IHT liabilities. For example, setting up a Family Limited Partnership (FLP) or a Family Limited Liability Company (LLC) can help transfer wealth while retaining control over assets.
- Seek Professional Advice
This is a complex area, and it’s worth getting professional advice to make sure you’re making the best decisions for your situation. At Blackstone Solicitors, we’re here to help you navigate these changes and find the best solutions for your family and your farm.
Conclusion
The “Tractor Tax” introduces significant changes to Agricultural Property Relief and Business Property Relief, which could have a substantial impact on your family farm’s inheritance planning. By understanding the new rules and planning ahead, you can take steps to minimise the IHT burden on your heirs.
If you have any questions or need help with your estate planning, don’t hesitate to get in touch with us at Blackstone Solicitors. We’re here to support you every step of the way.
We have a proven track-record of advising upon all aspects of private client work. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.to incorporate, what kind of ownership
How to Contact Our Private Client Solicitors
It is important for you to be well informed about the issues and possible implications of drafting a Will and setting up a Trust. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Private Client solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
Comments are closed.
