Should I gift farmland to family members?

Until now there has been no tax benefit for making lifetime gifts of business or agricultural assets as the assets passed without Inheritance tax or Capital Gains Tax.

Changes announced in the 30th October 2024 budget mean that after 6 April 2026, there will be an Inheritance Tax (IHT) charge of 20% on business or agricultural assets which exceed the new £1m allowance and nil rate band allowance.

For those considering making a gift of agricultural land or property now or after 6 April 2026, you can still make an outright gift in your lifetime and if you survive for seven years after making the gift it is IHT free. Capital Gains Tax (CGT) can be held over on gifts of agricultural or business assets, so although there may be a gain in the future, i.e. if it is sold, no charge is triggered on the gifting itself.

There is now more incentive for farmers and business owners to consider lifetime gifting.  This is why conversations around succession of the farm business are so important as this needs to be considered along with the ownership of assets.

It is also important to have an up-to-date valuation of the assets so that an informed decision can be made.

The government has now published further details following the recent consultation on APR and BPR and the draft Finance Bill.

As a reminder of the changes, after 6 April 2026, a married couple will between the be able to leave £2.65m free on IHT (this is two APR/BPR £1m allowances and two nil rate bands of £325,000). If either of their estate is valued under £2m on death, then a further £350,000 residence nil rate band may be available.

It is worth noting that pensions are brought into the scope of IHT from 6 April 2027.

If you do decide to gift parcels of land to family members for their own farming/recreational use, think about issues such as how it may affect rights of way and access, wayleave agreements, ELMS and your ongoing farming operations. If the land is for development to perhaps to allow them to covert a redundant farm building, consider a pre-nuptial or post-nuptial agreement or a co-habitation agreement if they have a partner, as you may not want a holding in the middle of your land sold because they have ended a relationship or marriage.

You could place a restrictive covenant on the land or building to ensure that what has been agreed remains in place, i.e. that they will only ever build one dwelling or the size of the dwelling.

It is also important to make sure everyone involved has an up-to-date Will as the rules of intestacy will apply after death if there isn’t a valid Will, which could also see the holding leave family hands.

There is clearly a lot to think about when considering any gifting of land or buildings, so before you make any final decisions, chat to our team about all of the options available and along with your tax adviser, we can help you to reach the best decision for your farm business.

Sarah Astley is an associate solicitor at Gullands Solicitors s.astley@gullands.com