South West Farmers Face New Tax Shock as IHT Rules Tighten

Farmers across the South West are being urged to review their financial and succession plans following upcoming changes to Inheritance Tax (IHT) announced in the Government’s Autumn Statement.

Major Changes Coming in 2026

According to Justin Hayward, Virgin Money Director, Agriculture for the South West, “Changes to IHT will potentially affect all business owners, but particularly in the South West.”

The new rules, which begin taking effect from April 2026 and continue into 2027, will alter the way agricultural and business assets are taxed after death. From 2027, inherited pensions will also be included in the deceased’s estate.

Reliefs to Be Capped

The Business Property Relief and Agricultural Property Relief schemes, which previously offered 100% relief for qualifying property, will be capped at £1 million of value. Any value above this will only qualify for 50% relief, making the taxable rate 20%.

For many family farms in the South West, where land, machinery and livestock often exceed the £1 million threshold, this could mean a significant rise in tax liability.

Planning Ahead

Justin said it is “important to work closely with your bank or lender early on” as any plans involving the transfer or restructuring of assets may affect existing lending or security arrangements. “Having your bank involved from the outset can help avoid delays and ensure financial plans remain aligned with your longer-term goals,” he added.

He advised that those who have not yet done so should seek advice from their financial and legal advisers to understand how the changes could affect them and what steps might be taken to mitigate the impact, including succession planning.

Banking and Lending Implications

Farmers whose assets are used as security for loans may face further considerations. Releasing legal charges on farm property secured to a bank will require prior approval, and sufficient time should be allowed for this process.

Changes to ownership or partnership structures could trigger additional legal reporting, valuations, and re-documentation of lending, which can take time depending on the availability of advisers and bank staff.

Justin also noted that “lenders’ approaches to these considerations will vary from bank to bank” and suggested that some businesses might benefit from seeking opinions from more than one lender.

A Time to Review Finances

Even where no immediate changes are planned, it could be an opportunity to reassess the structure of financial arrangements. This includes reviewing loan terms, repayment schedules, and whether facilities are on a fixed rate, interest-only, or interest-and-capital repayment basis.

With the first stage of changes approaching in April 2026, many in the farming community will now be watching closely to understand what the reforms mean for the future of family-owned farms in the South West.

📷Justin Hayward, Agricultural Director, Virgin Money