Inheritance tax time-bomb is looming – Yorkshire farmers should act now
The fuse is burning down on the government’s inheritance tax (IHT) time-bomb for farmers, UK top 10 accountancy and advisory firm Azets in Yorkshire has warned.
Under legislation to be introduced by the Finance Act 2026 new restrictions will apply to the amount of Agricultural and Business Property Reliefs available on the estates of farmers dying after 5th April 2026.
It could see rural families in Yorkshire forced to sell land that might have been theirs for generations.
In the majority of cases the changes mean that 100 per cent Agricultural Property Relief and Business Property Relief will only apply to £2.5m of qualifying assets, per individual, with 50 per cent relief applying to the balance.
Partner Richard Major, a chartered tax advisor, who leads the Azets’ private client team in Yorkshire, said: “The problems began immediately following the 2024 budget when the restrictions were announced without any detail.
COUNTDOWN: Partner Richard Major, a chartered tax advisor, who leads the Azets’ private client team in Yorkshire, is warning rural businesses about the introduction of new inheritance tax rules
“The restrictions were effective immediately for gifts made post budget day, if the farmer were then to die post 6 April 2026 but within seven years of their gift, and so prompted the need for advice and action.
“But there was no certainty as to the legal form of the changes until the draft legislation was finally made available on 21July 2025.
“Our team were surprised that the draft legislation ignored the recommendations within the House of Commons’ Report of 16 May 2025 – The Vision of Farming.
“It recommended a more generous level of Agricultural Property Relief to be made available to genuine farmers rather than a blanket lower level of relief to all including investors in agricultural land.
“We then had changes in the 2025 budget allowing the transfer of unused allowances between spouses, followed in December by the announcement that the £1m limit was to be increased to £2.5m per individual.”
Many estates may still exceed the new £2,5m threshold for a variety of factors, such as property values, investments, pensions and other assets such as expensive machinery.
Richard, who is based in Azets’ Leeds office, said: “We meet farmers regularly and the stress and worry the policy is causing is undeniable.
“Most viable farming enterprises have a value per head in excess of £2.5 million and we have a lot of clients impacted by this change.
“Some of the older famers feel guilty that they are somehow letting their families down and consider it unfair that they haven’t been allowed time to do any planning.
“Many are asset rich but cash poor and so acknowledge that parts of their farms may need to be sold to fund the inheritance tax liabilities.
“This is a complicated issue and it’s not as easy as just giving some land away and then hoping you live beyond the seven-year rule when it is free from IHT.
“Trusts have been proposed as a planning option, but they won’t suit all farms and are complex – every single case is different and there is no off-the-shelf solution.
“Careful planning must be undertaken with consideration given to the current and intended future use of each part of the farm.
“We recommend that, if they haven’t already done so, farmers seek good financial and legal advice as soon as possible in order to get proper planning in place and to best mitigate against the tax.”
Richard added: “One of our fears is that there are farmers out there who are tempted to just bury their heads in the sand and hope the problem goes away.
“Whilst we understand the uncertainty caused by the way the restrictions have been introduced may make farmers hopeful that further changes could be announced, time is running out.
“Farmers need to understand how this will impact them, their families and their farms and how best to manage this, and the best way is to get expert advice that is tailored to their situation and circumstances.”
There are about 7,000 commercial farms in Yorkshire. Latest figures from ONS showed that total income from Yorkshire and the Humber stood at £582m in 2024.
Azets has three offices in Yorkshire, in Leeds, Bradford and York, where it employs 335 people.