Written by Ian Barnett, National Land Director, Leaders Romans Group (LRG)
October’s Budget sent shockwaves through the agricultural sector, particularly among landowners and farmers. While the government touted the tax increases as targeting ‘the wealthiest estates’ it has caused considerable concern among farms of all sizes, especially family farms.
The changes to Agricultural Property Relief (APR) on Inheritance Tax will invariably impact on ‘working people’ despite assurances to the contrary.
However, in circumstances in which landowners had planned to release land for development, there are opportunities (partly due to recent changes in the planning system) for landowners to mitigate these changes through strategic land sales and well-chosen developer partnerships.
A double whammy for farmers and landowners
The Budget’s most significant impact was the change to Inheritance Tax reliefs. The longstanding APR, which allowed working farms to pass land and property from one generation to the next without incurring a hefty tax bill, has been significantly reduced. From April 2026, the first £1 million of qualifying assets will remain exempt from Inheritance Tax, but anything above that threshold will be taxed at an effective rate of 20%. This change is likely to hit the majority of farm businesses, as the asset value of most farms far exceeds the £1 million cap. The assumption all these businesses are ‘wealthy’ is far from true.
The National Farmers’ Union (NFU) has already voiced strong concerns in relation to the reduction in APR, highlighting that while the reform might save the Treasury £120 million per year, the cost to farmers and rural communities (and thereby the knock-on effect on the economy) could be far greater.
Strategic responses to the tax burden
But while this change may seem like a grim prognosis for landowners, there are ways to mitigate the tax burden. LRG is not a tax consultancy, but we are aware of situations in which landowners may wish to spread asset ownership among family members to maximise the available reliefs. Since the £1 million APR/BPR allowance is not transferable between spouses or civil partners, it is crucial that both partners make full use of their individual allowances. A strategy that involves gifting assets to children or other family members could be beneficial, particularly if these transfers occur well in advance of any inheritance event.
Transferring land in personal ownership into a company structure may prove a canny move for smaller-scale landowners too. Some landowners will have already transferred their land holdings into a Limited Company or a Family Trust.
Additionally, there is a silver lining in emerging planning policy: following the government’s revisions to the National Planning Policy Framework (NPPF) which published for consultation in July and is due to be confirmed before Christmas, the increasing likelihood of gaining planning consent for greenfield land, including in some circumstances that within the Green Belt, increases the likelihood that land can be sold for development. To do so efficiently, landowners can work with strategic land sales teams and developers to structure land sales in a way that minimises tax exposure while maximising the value of the land.
Partnering with developers: a smart way forward
Landowners can also mitigate the impact of the tax changes through well-structured developer partnerships. Today, partnerships can offer much more than just a straightforward land sale. Good land sales and planning advice utilises innovative design to maximise land usage, or tap into additional funding streams such as biodiversity net gain (BNG) credits or making land available as suitable alternative natural greenspace (SANG) – quality greenspaces which developers may use to offset the impact of new development.
For those considering a land sale, entering into an agreement whereby sale is sold subject to planning consent, with planning consent or involving options and promotions agreements can significantly increase the value of the land. The value can be increased further with a considered approach to the various tenures that make up a profitable site – from Build to Rent and the private rented sector through to the best mix of residential and commercial units is the type of planning advice which can considerably increase profitability ahead of a land sale. Furthermore, identifying the potential for energy-saving solutions which both ‘place a tick in the box’ when it comes to planning consent and also create an attractive and energy efficient scheme will also benefit profitability.
Final thoughts
While the recent Budget may have introduced significant challenges for farmers and landowners, the challenges are countered by opportunities for those willing to sell some land for development.
My message to landowners concerned about these changes is to seek good professional tax and planning advice at an early stage. If you are part-way through a land sale, ask your solicitor to review the contracts to check your position. Stay tuned to changes in planning law, which may provide some welcome news and seek planning advice before entering into a contract for a land sale.
