As the government’s October budget approaches, there are growing worries about
the possible end of Agricultural Property Relief (APR). This tax relief currently helps
farmers pass down land and property without paying a large inheritance tax bill. If the
government removes this support, the financial impact on farming families could be
severe.

What Could Happen Without APR?

Right now, APR offers big tax savings on farmland, buildings, and other agricultural
property when it’s passed down to the next generation. Without APR, farms worth
more than £325,000 (or up to £1 million for married couples) could be taxed at 40%.
For example, a farm valued at £2 million could face a tax bill of up to £800,000 if
APR is abolished. Most family farms don’t have that kind of cash readily available, so
they might have to sell land or equipment to pay the tax, which could make it hard to
keep the farm going.

Immediate Challenges for Farmers

If farmers are forced to sell off parts of their land to pay taxes, it could disrupt how
they run their operations. Selling off land, buildings, or machinery might mean losing
productive land or the equipment needed to work it efficiently. This could lead to a
drop in farm income and make it harder to keep the farm running smoothly.

What Can Be Done? Planning Ahead

If APR is removed, there are still ways farmers can prepare and protect their assets:

Setting Up a Family Trust: This involves putting farm assets in a trust to manage who
owns them and pass them down while reducing tax bills. While setting up a trust
costs between £5,000 and £15,000 per year, it can be worth it when compared to
potentially huge tax cost.

Finding New Ways to Make Money: Farmers might consider diversification and
adding new income sources, like renting out land for solar panels or offering farm
stays for tourists. A small solar panel setup might cost £30,000–£50,000 upfront, but

it could bring in £8,000–£15,000 a year, which could help cover taxes and other
expenses.

Buying Life Insurance for Tax Costs: Taking out a life insurance policy to cover the
possible tax bill can ensure there’s money available when it’s needed. A policy
covering £800,000 might cost around £5,000–£10,000 per year, depending on age
and health. This can prevent families from having to sell parts of their farm quickly.

Turning the Farm into a Company: Restructuring the farm as a limited company
might offer some tax benefits. Farms that qualify could use business property relief,
which may stay even if APR is removed. Setting up a company might cost between
£1,500 and £5,000, but it could save money on taxes in the long run.

Impact on Tenant Farmers

If landowners have to sell parts of their farms to pay taxes, tenant farmers could be
affected too. They might face higher rents or even lose access to the land they farm.
In this case, it’s important for tenant farmers to look into securing long-term leases or
finding new ways to earn income to protect themselves.

What the Government Needs to Do

Farmers need clear guidance from the government if APR is removed. If changes
are made, a gradual phase-out or rules that keep the old system for current owners
could give farmers time to plan. It’s important that the government listens to farmers
and finds other ways to support the industry, like offering tax credits or incentives for
farms that invest in green projects or rural development.

Conclusion

Ending APR could create serious challenges for farming families, but there are steps
they can take to prepare. Setting up trusts, exploring new income sources, and
getting life insurance are all ways to protect the farm. However, the government’s
support and clear guidance are key to ensuring that farms can adapt and thrive in
the future.