IHT: Potential Reforms and the Need for Strategic Planning for Farms and Estates

IHT: Potential Reforms and the Need for Strategic Planning for Farms and Estates

Anna Loweth

Anna Loweth

Oct, 17 2025

Reports of recent discussions in Westminster have brought inheritance tax (IHT) back into focus, particularly its impact on smaller farms and rural estates. While nothing has been confirmed, speculation includes a potential increase to the agricultural property relief threshold – possibly up to £5 million for individuals or £10 million for a married couple. Even with these potential changes, larger estates and farming businesses would still face significant IHT liabilities.  

The government appears willing to consider a compromise, but for many farmers and landowners, the situation remains complex and challenging.    

Why Is Understanding Asset Ownership So Important?  

During this time of uncertainty, it’s critical for landowners to understand what they own – and that means far more than land and property. Machinery, equipment, and other assets all form part of the estate and need to be factored into planning. A clear picture of your assets ensures that decisions around gifting or succession are fully informed.   

How Can Lifetime Gifting Support Succession Planning?

There are murmurs that the government may be considering extending the Potentially Exempt Transfer (PET) period from seven years to possibly ten. Lifetime gifting of farm or estate assets through PETs can be a valuable tool for succession and IHT planning, helping families manage future liabilities and transfer assets efficiently.  

Even with guidance from your solicitor and accountant on the legal and financial aspects, it’s just as important to consider the real-world and personal impacts of transferring assets across generations. Decisions on when and how to make a gift often depend on wider factors such as affordability, operational feasibility, and family dynamics. Gifts made without careful planning can lead to complications around management, governance, and family relationships. Thoughtful consideration and professional guidance are key to ensuring that lifetime gifting achieves its intended benefits while minimising potential risks.  

How Can You Avoid Common Pitfalls in Gifting?

One critical aspect to consider is ensuring there is no “reservation of benefit.” The Gifts with Reservation of Benefit (GROB) rules require that once an asset has been transferred, the donor no longer derives any benefit from it. For instance, if a donor continues to live in a house they have already gifted, HMRC may treat the arrangement as invalid for IHT purposes. To avoid this, it’s important to establish a bona fide legal tenancy agreement, ensure market rent is paid, and maintain proper documentation.   

Additionally, when dividing assets among multiple family members, it’s vital to address potential governance issues. Shared ownership can lead to conflicts if not managed properly. Establishing clear agreements and structures can help mitigate these risks.   

What About the Financial Viability for Recipients?

Owning assets comes with ongoing responsibilities. Maintenance, repairs, and regulatory compliance can quickly add up, and not every recipient may have the resources to manage these costs. It’s important to ensure that the person receiving the assets can sustain the financial and practical demands associated with them. This step helps ensure that gifts are sustainable and that the farm or estate can continue to operate effectively across generations.  

How Could SDLT Changes Affect Planning?

Alongside IHT, Stamp Duty Land Tax (SDLT) continues to be an area of potential change. There is speculation that future reforms could alter how SDLT applies to farm property transfers and sales. While nothing has been confirmed, it’s an area where careful planning can make a significant difference, particularly for families looking to restructure ownership or transfer land between generations.  

Why Is Proactive Planning More Important Than Ever?  

While speculation about potential inheritance tax reforms continues, it remains vital for farmers and landowners to focus on proactive estate planning. Understanding the value and structure of your assets – from land and property to machinery and other business assets – is the first step in developing a strategy that works under current regulations while remaining adaptable to future changes.  

At Ceres Property, we support our clients in navigating these complexities. From valuing assets and structuring gifts to succession planning and family governance, our team ensures that your estate strategy is robust, realistic, and aligned with your long-term objectives.  

The ongoing discussions around IHT have sparked generational conversations that might never have occurred during the transferor’s lifetime. While potential reforms remain uncertain, the fact that these topics are being openly discussed is itself a positive development for farming families.  

If you are considering how potential changes might affect your estate, or want to ensure your current plans are future-proof, Ceres Property is here to help. Our experts provide tailored guidance to support you through these evolving discussions.  

Contact Us:

Anna Loweth
anna.loweth@ceresproperty.co.uk
07599 110 034

Edward Rout
edward.rout@ceresproperty.co.uk
07511 878 264

Michael Anderson
michael.anderson@ceresproperty.co.uk
07792 132 417

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