APR and IHT reforms and the High Court challenge – what it means for farming families

Prior to April 2026, Agricultural Property Relief (APR) provided up to 100% relief from inheritance tax (IHT) on qualifying agricultural property. In practical terms, this allowed many farming families to pass land and farming buildings down through generations with little or no IHT liability.

That position has now changed following the Autumn Budget in October 2024, in which the government introduced a cap on the availability of APR. While the cap was initially set at £1 million per individual, this was increased, following consultation and industry pressure, to apply to assets worth up to £2.5 million in an individual's estate.

Under the new rules:

• full APR applies to the first £2.5 million in an individual's estate; and
• any value above this threshold receives only 50% relief.

Business Property Relief which applies to the farm assets (other than property) has also been restricted in the same way and the £2.5 million allowance applies in aggregate across claims for both.

As a result, many farming estates that were previously outside the scope of IHT now face significant tax exposure, increasing the likelihood of disputes between beneficiaries and in some cases necessitating the appointment of independent administrators to ensure the estate is managed impartially.

The High Court challenge

A group of farmers sought to challenge the reforms by way of judicial review, arguing that the government had failed to carry out a proper consultation.

The High Court dismissed the claim, confirming that:

• there was no enforceable legal obligation on the government to consult on the reforms;
• tax policy arising from the Budget is primarily a matter for Parliament, not the courts; and
• the claim was brought too late

The position is therefore now settled, and the APR cap is in force and must be planned for, although it remains subject to potential change under a future government.

The practical impact for farming families

Consider a typical scenario:

Deborah and Peter run a 600‑acre farm in Somerset worth approximately £10 million, generating annual income of £50,000–£150,000. Their sons, Tom and Phil, both work on the farm and expect to inherit it.

Under the previous regime, qualifying farmland and farming buildings would have passed free of IHT.

Under the new rules, however, even with the benefit of Deborah and Peter's combined £5 million allowance, the estate could face an IHT liability of around £1 million when they have both died. Tom and Phil could then have a liquidity issue, because farming estates are often high in land value but low in available cash. This creates a difficult reality for executors over the funding of significant inheritance tax bills.

Without advance planning, this can lead to a forced sale of land or farm assets, a reduction in the long‑term viability of the business and disputes between beneficiaries.

Importantly, the impact is not limited to the farming assets themselves. In many families, non-farming asset, such as pensions or investment portfolios, may have been intended to pass to non-farming children to achieve a degree of fairness. Those assets may now either fall within the IHT net or be required to meet an IHT liability that arises in part from the farming business. This can significantly alter the intended balance between beneficiaries and create further tension where expectations no longer align with the economic reality of the estate.

Why estate administration is now more complex

The introduction of an IHT liability fundamentally changes the role of those administering the estate.

Executors may now face:

• Difficult decisions about selling and/or borrowing against estate assets
• Pressure from different family members with competing interests
• The need to balance:
  • tax liabilities;
  • preservation of the farming unit; and
  • fairness between beneficiaries.

While IHT instalments may be available, in practice they are often insufficient, as the required payments can significantly erode the farm’s income.

In many cases, family members who act as executors and are also a beneficiary of the estate can find themselves in a position of conflict, particularly where one beneficiary is actively farming and others are not.

The value of an independent administrator

This is where the appointment of an independent professional executor or administrator can be invaluable.

An independent administrator can:

• act impartially, reducing the risk of family conflict;
• bring experience in handling complex estates, including agricultural assets;
• manage difficult decisions around:
  • sales of land or property;
  • negotiation with beneficiaries;
  • engagement with valuers and HMRC; and
• Ensure the estate is administered efficiently and in compliance with legal and tax obligations.

Importantly, they provide distance and objectivity at a time when families are under significant financial and emotional pressure

What should you do if you hold farmland in your estate?

1. Review wills – previously, will drafters may have advised on the assumption that APR will eliminate IHT entirely. This is no longer the case. Wills should reflect potential tax liabilities and provide executors with appropriate powers and flexibility.
2. Consider executor appointments carefully - clients should actively consider whether a professional executor should be appointed given the increased complexities in estate. administration and the potential for disagreement amongst beneficiaries.
3. Plan for liquidity- understand the likely IHT exposure and how it will be funded including asset sales, borrowing and insurance.
4. Engage the family early – having open discussions about succession, expectations and fairness can significantly reduce the risk of disputes later.

Conclusion

The reform of APR represents a significant shift for farming families, who must now plan for payment of inheritance tax on assets that once passed between family members free of inheritance tax.

Careful planning is essential but equally, so is the right support when the time comes to administer the estate. An independent administrator can play a critical role in ensuring that estates are handled fairly, efficiently and with minimal conflict, helping to protect both the family and the farming business for the future.

For advice on tax planning, please contact Robert Davies. For any potential disputes arising from the change to APR or to discuss the role of an independent administrator, please contact Elizabeth Ware.