Fears that a major tax break on farm land and buildings could be axed in this month’s Budget are unlikely to become reality, according to financial advice firm NFU Mutual.
However, farming families should pay close attention to the chancellor’s speech on October 29, as other more likely changes to inheritance tax could make family finances and succession plans in urgent need of updating.
The outcome of an official review of inheritance tax by the Office of Tax Simplification (OTS) is also expected soon.
The review was ordered by the chancellor and will look at inheritance and all of its reliefs – including Agricultural Property Relief which can allow qualifying agricultural land and buildings to be passed through generations without triggering inheritance tax bills.
Sean McCann, Chartered financial planner at NFU Mutual, commented: “With the chancellor looking to raise more revenue, it’s likely some changes to inheritance tax rules will be in store in the Budget on 29th October.
“However, Agricultural Property Relief (APR) and Business Property Relief (BPR) are unlikely to be in the chancellor’s crosshairs. Both APR and BPR are generally considered to work well – ensuring many family businesses can be passed down through generations without being hit by punitive tax charges.
“Farming families could be hit by changes to other inheritance tax breaks and possible adjustments to tax relief on pensions.
“While some changes announced during the Budget, like those to duty on cigarettes and alcohol, can increase on the stroke of midnight, most substantial changes we expect to be implemented in April 2019 at the start of the new tax year.
“That extra time is crucial as it gives individuals, families and businesses the opportunity to take stock, seek advice and make the necessary changes to make the most of any new tax rules. It makes sense for people to see their financial adviser soon after the Budget so they can make any necessary financial decisions.
“We will be reviewing the Budget statement in detail so we can let our farming members know if any urgent action needs to be taken to protect their finances.”
Inheritance tax receipts hit £2.8bn in the first six months of the tax year while receipts for the 2017-18 tax year hit a record £5.2bn.
In the latest figures from HM Revenue & Customs, Agricultural Property Relief was worth almost £1bn (£996m) to the 1,300 estates that claimed it in 2015-16.