During Donald Trump’s visit to Scotland –mixing business and pleasure (at family-owned golf courses) – he found himself becoming an unlikely darling of the British farming community.

At one of his free-wheeling Q&A sessions held with Keir Starmer at the Trump Turnberry resort, he referred to the government’s reforms to agricultural property relief (APR) and business [property] relief (BR), two key UK inheritance tax (IHT) reliefs for farmers and business owners (often those with interests in a partnership or shares in a private company).

In response to a question about taxation on inherited agricultural assets, Trump replied that he had ‘abolished’ the tax to save family farms. Sitting alongside him, Starmer shifted uneasily in his seat. As ever with Trump, there is a more nuanced truth.  However, the comparison he drew is that he had abolished an unfair ‘death tax’ whereas Starmer was forced to defend IHT as being ‘fairer’.

In the UK in contrast, material changes to IHT affecting those with pensions, agricultural and / or business interests are looming:

• As of 6 April 2027, unused pension pots (with limited exceptions) will in principle be within the scope of IHT. Conventional wisdom in recent years had been for those who had worked hard to accumulate their pension pot to, on retirement, then use other assets in order to preserve the pension as a tax planning vehicle – essentially to transfer wealth onto their family free of IHT. That planning has now been turned on its head; and
  
  
• As of 6 April 2026, BR (previously called business property relief) will be restricted. Currently, BR provides 100% relief from IHT for unquoted share holdings and interests in a business (whether owned as a sole trader or in partnership) located anywhere in the world. The government intends to restrict the 100% relief to the first £1m of the aggregate value of business and agricultural property, with a lesser rate of 50% relief applicable thereafter. Broadly equivalent changes are being proposed to APR – a relief from IHT applicable to land in the UK occupied for the purpose of agriculture. That proposed restriction has provoked a passionate response from business owners and farmers, including mass gatherings and convoys of tractors driven into town centres.  Again, these are fundamental changes that upend established IHT planning for many and often where the capital value is illiquid or difficult to realise.

These changes may be placed squarely in context in a publication by HMRC (31 July, 2025) that states that the value of IHT liabilities and the number of estates subject to inheritance tax both had double-digit percentage increases during the 2022-23 tax year. The IHT ‘take’ in that financial year rose to £6.7bn, with a projection that IHT will rise to £14bn – more than double! – by the end of this decade. 

The combined value of APR and BR relief set against relievable assets was £5.28bn .  It is anticipated that once APR and BR are restricted come 6 April 2026 that the protection from IHT provided by these reliefs will plummet and IHT receipts will consequently rise.

In a world in which UK plc is struggling to raise funds to pay for its outgoings, particularly around increasing defence and welfare commitments, IHT is likely to become ever more important as a means to fund government spending. Indeed, a wealth tax has also been mooted (a flat 2% on assets over £10m – imposed on a one off or annual basis).

As lawyers and trusted advisers to many farmers and business owners, we are now seeing a surge in enquiries as it becomes apparent that the government intends to go through with its changes to these reliefs despite stiff resistance to them by interested stakeholders (draft legislation was recently published on 21 July, 2025).

Basic building blocks of IHT planning – wills and powers of attorney (POA) (a protection against temporary or permanent capacity) – should be revisited.  If you do not have either of these (and alarmingly surveys consistently indicate that more than 66% of Scottish adults do not have a will) then now is the time to put these in place.  Few of us would think it acceptable to fail to insure our farm, business premises, contents and workforce. Business owners in particular may wish to consider a main POA with a secondary one governing only business affairs.

Thereafter, working closely with your accountant, stockbroker and / or wealth / pension adviser, it is possible for us to structure your affairs to maximise your access to inheritance tax exemptions and reliefs and create not only certainty but also tax efficiency.  

That may include a review of your partnership agreement (do you have one and is it up to date?), articles of association or indeed how shareholdings are held (by you / other family), structured (rights and shares classes) and the rules around their transfer (in lifetime and on death). A contract governing how the business shall operate may also be required (a ‘family charter’ or a ‘shareholders’ agreement’).  Experienced advisers will explore your cash flow needs (during work and on retirement), your asset mix and whether assets should be retained or gifted, consider if any life insurances may be required, and if nominations for such insurances (and any pension schemes) are in place and reflect your wishes. 

An up front investment on professional fees invariably results in a return in the form of material tax savings often many times over (especially where the headline rate of IHT is at 40% and in a tax system as complicated as that of the UK). Moreover, it provides certainty and peace of mind in lifetime and in the future – on death – at what is already a difficult time, avoiding any dubiety or disputes that may harm the continued successful operation of a farm or business and thereby protecting your legacy.

Given the scale and impact of these changes to inheritance tax do not delay - with the countdown until the April 2026 changes now less than eight months away and counting. If you'd like to discuss the impact of these changes, please get in touch with our private client team.

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