Keep the farm in the family

Without a will, the law decides who gets the farm, and it may not go to the child who farms it. A good will:

• Says who gets the land, the farming business and the farmhouse, and who gets something else instead, so non-farming children are treated fairly without splitting the farm up.
• Makes sure both spouses' allowances get used. Anything left to a husband, wife or civil partner is free of tax, and their unused £2.5 million, £325,000 and £175,000 pass on. Some couples leave the farm straight to the children on the first death instead, to use that allowance while the rules are known. Ask which suits you.
• Doesn't waste relief. Gifts to a spouse or charity are tax-free anyway, so leaving them the farmland (which has relief) while savings go to the children (which don't) can mean paying tax you didn't need to.

Review it after any change: a marriage, a death, buying or selling land, or new rules (like April 2026). Making a will on GOV.UK

• Relief depends on facts at death, so keep the land farmed and the business trading. Land that's simply let out, or a business that's mostly lettings, can lose BPR.
• Have a written partnership agreement if the farm is run as a partnership. It should say who owns the land (in the partnership or outside it), and what happens to a partner's share when they die.
• A farmhouse only gets APR if it's the centre of an active farm and its size suits the farm. Keep records of who farms and lives there. If the farmer moves into a care home, take advice early.
• Keep the business's debts secured on assets that don't qualify for relief where you can. A loan secured on farmland reduces the relief.
• Be careful with diversification. Holiday lets, storage and livery yards are usually investments, not farming, so may not qualify. Keep them as a small part of a mainly farming business, and take advice before big changes.

A gift to your children is free of inheritance tax if you live 7 more years. If you die sooner, it's added back, with less tax due once 3 years have passed (taper relief: 32%, 24%, 16%, then 8% instead of 40%).

• Gifting land over several years lets you pass on more than £2.5 million at full relief: the allowance looks back over the last 7 years, so gifts made more than 7 years before death free it up again.
• The person you give farmland to must keep it farmed until you die (or they do), or the relief on the gift is lost.
• Don't keep a benefit. If you give away the farmhouse but still live there rent-free, or keep the income, the gift doesn't count (a "gift with reservation"). Pay a full market rent, or give a share and farm together.
• Capital gains tax: a gift counts as a sale at market value. Holdover relief usually puts off the tax on gifts of business and farmland, but the children then take over your original cost. Assets kept until death get a free uplift to their value at death instead, so for some families keeping land is better than gifting it.
• Small gifts help too: £3,000 a year each (plus last year's if unused), £250 to anyone, wedding gifts, and regular gifts out of spare income, which are free straight away.
• Gifts made from 30 October 2024 to 5 April 2026 are judged under the new £2.5 million rules if the giver dies from 6 April 2026 within 7 years.

Gifts and the 7-year rule · Holdover relief

• Make the son or daughter who will farm a partner in the business, or a shareholder in the company, so profits and business assets build up in their name.
• Give or sell them a share of the land or the business bit by bit, using holdover relief and your yearly allowances.
• A farming company can be useful for very large farms, but moving land into a company can mean stamp duty and capital gains tax, and changes how relief works. It's not a quick fix.
• Agree a plan as a family, write it down, and tell everyone. Most farm disputes come from promises that were never written down (courts can enforce them).

• A trust can hold land for the family, keep the farm in one piece, and let you choose later which child gets what.
• Each person can put up to £2.5 million of relief-qualifying property into trusts in total. Trusts set up before 30 October 2024 each keep their own £2.5 million.
• Trusts pay their own inheritance tax: up to 6% every 10 years, and when property leaves the trust. With relief, that's often small, but the paperwork and fees are ongoing.
• Putting assets into a trust can be a gift with reservation if you still benefit. Setting one up is a job for a specialist solicitor.

Trusts and taxes on GOV.UK

• A life policy written in trust pays out to the children outside your estate, so they can pay the tax without selling land.
• For couples, a "joint life, second death" policy pays when the second of you dies, which is usually when the tax is due. It's often cheaper than you'd think.
• The premiums can usually be gifts out of income, so they're free of tax straight away.

• Inheritance tax on farmland and business property can be paid in 10 equal yearly payments with no interest, so the farm's profits can pay it.
• Plan where that money comes from: a cash reserve, rent from a let cottage, insurance, or selling a small bit of land or development plot.
• If the farm is sold, the rest of the tax becomes due at once.

Paying in instalments

• Pensions count towards inheritance tax from 6 April 2027. Spending pension money first and keeping farm assets (which get relief) may now make more sense. Ask your adviser.
• Make a lasting power of attorney for money and for health, so someone you trust can run the farm and sign forms if you can't. Without one, your family may need to go to court. Power of attorney
• Keep the farm's numbers in one place (SBI, CRN, CPH, herd marks, deeds, tenancies and scheme agreements) so the next generation can take over smoothly. The My details page and a printed copy with your will help.
• If you sell land, Business Asset Disposal Relief cuts capital gains tax on a business sale to 18% (from April 2026), up to £1 million of gains in your lifetime. BADR on GOV.UK