Death and Taxes S5:E5 – Protecting Rural Wealth: Legal and Tax insights ahead of April 2026

In this podcast, we look at what this means for landowners and rural business owners and the action they should consider taking in advance of 6th April, 2026. And I’m delighted to be joined by my colleagues, Tim Williams and Hannah Petherick. Tim is a partner in the firm’s Private Wealth team specialising in tax, estate planning and trust work. He works with a number of land owning and farming businesses, often advising on succession and tax structures and has a particular focus on strategic land holdings and development sales. Hannah is a partner in the Family law team and specialises in advising on the complex issues which arise with financial settlements on divorce, including issues about company structures and trusts, often with a particular focus on farming cases.

So, Tim and Hannah, welcome to this landowners special. In the context of inheritance tax, clearly for a long time, agricultural property relief (APR) and business property relief (BPR) have been relevant to estates, albeit perhaps worth noting that in recent times, increasingly it’s been business relief that landowners have had to think about more as their rural businesses diversify. But Tim, farmers and landowners recently been very vocal about the upcoming tax changes, often called the farmers’ tax. But where do we think that lobbying has got to and have they had any impact on the proposals?

Tim Williams (02:07)

Well, thanks Guy it’s an interesting question. I mean, yeah, as you say, farmers and landowners are probably the most vocal of all those affected by the APR, BPR changes. And that’s, I think, probably largely because there is a feeling amongst landowners that they are more adversely affected by these changes than maybe other businesses. And that’s probably partly because for landowners, the difference between the value of their assets in capital terms and the income it produces can often be quite far apart compared with a different sort of business or even different types of investment.

So I think that’s probably what led people to be particularly exercised about it in the landowner world. As to whether their protestations have had any great impact, I think we can safely say from the changes between the published intention in the budget and the draft legislation we’ve now got, there hasn’t really been any change at all. We are still at the level of a million-pound cap on the value of agricultural or business property, which will qualify for 100% relief and 50% relief thereafter.

So APR and BPR haven’t gone away entirely. It’s just they are less valuable than they were. But I think it’s now led landowners and all business owners in fact, to think more carefully about how they reduce the value of their estates, the risk exposed to tax because things that get relief will now also have a tax bill where they didn’t previously.

Guy Broadfield (03:39)

And indeed, the challenges facing landowners and rural businesses are similar in many ways to other family businesses, whether they’re in the manufacturing sector, for example, or otherwise and so listeners to Death & Taxes will be aware we did an episode on family businesses earlier in the season. So do look out for that if you’ve not listened to it already.

But for the purposes of this pod, we’re going to look at some of the options available to landowners ahead of April 2026 in terms of tax considerations and indeed asset protection. So, on the latter point of asset protection, Hannah, in some cases clients are considering giving away interests in rural businesses or land to the next generation earlier than they might otherwise have done so or expected. And leaving aside the tax considerations, from your perspective, that comes with certain risks for asset protection.

So, what are the main considerations you’re discussing with clients at the moment on that aspect?

Hannah Petherick (04:41)

Yeah, thanks Guy. Obviously when people are giving gifts away, they want to be sure, particularly where they’ve got estates or land that have been in the family for generations, that they’re going to stay within the family. And one of their concerns is often what happens if their children are in relationships that break down and end in divorce and whether the estate is potentially going to beat risk from this. And so what we’re seeing a lot at the moment is advising clients about pre and post nuptial agreements that go sort of hand in hand with this sort of planning.

And historically, people have been worried that prenuptial agreements aren’t binding in this country or are only sort of the prevail of the rich and famous, but actually more and more they’re becoming increasingly common and listeners may well be aware of the history around the law in this area and there was a case of Radmacher and Granatino back in 2010 and that set out the conditions that need to be complied with in order for these types of agreements to be binding. They’re not automatically binding in this country because we have a discretionary legal system but provided that people are properly drafted and there’s full disclosure, so people know exactly what the assets are both parties have independent legal advice and they’re not under pressure, which normally means signing up well in advance of any wedding. They will be binding provided that both parties’ needs are met by the provisions made in the agreement.

And what this means is ensuring that the outcome of the agreement is that both parties have housing and an income and that if that’s not going to be possible because there’s a huge disparity of assets on one side that provision is made and what we sometimes see is agreements that say I have inherited this estate, if our marriage breaks down I will keep it but you will be provided with a housing fund at that time and what that fund may be will be determined at the time so they are quite future proof in that way.

Guy Broadfield (06:43)

And often alongside the tax planning, it’s seen as a first line of defence really in asset protection terms and 10 years on from that first case, I know Hannah will come on to talk about it later, but there’s the recent case of Standish also of importance for listeners when it comes to marital agreements and we’ll come on to that later in the pod. But Tim, just circling back on the problem facing landowners and rural businesses from 6th April, 2026. Do want to talk briefly as to what it means for people in terms of their estates and what the challenges are in terms of passing on meaningful value?

Tim Williams (07:23)

Yeah, thanks, Guy. As you say, I mean, the aim of the gifts that Hannah’s just discussed is really to put value outside of your estate, because if you give it away and you live for seven years, then it’s outside your inheritance tax estate. But there’s a balance to be struck, which could be particularly challenging for landowners, I think, of maintaining the income and assets that you need to support yourself if you’re the person giving assets away versus that meaningful value transfer.

I think part of the reason it’s particularly difficult is often the people looking to give away value might live on the farm, they might live in some of the property, they might use it as part of their business and they may rely on the income from it. Now that’s not the case for all landowners, the business may be big enough that they can give away sufficient value whilst keeping sufficient income to keep them going. But it’s a really delicate balance for some businesses, particularly at the smaller end. It’s a sort of; part of that is about tax and we’ll come on to talk about what reservation of benefit means in a bit. But I think for all people giving assets away, whether they’re landowners, family businesses, or any individual giving stuff away as part of their IHT planning, they really need to think carefully about making sure they’ve got enough to sustain them for the rest of their lives, whatever that may bring in terms of care costs and all those sorts of things in the future.

Guy Broadfield (08:41)

Yeah, and the importance of cash flow modelling and financial planning as a first step often in these considerations is important. That sits alongside the tax and legal advice from our, you know, in our experience. So in terms of the specifics, Tim, what action are people looking to take before next April? What are they doing or what are they looking to implement?

Tim Williams (09:06)

Well, at the simplest, it’s looking to give things away and I think there’s four factors that I’d have in mind when you do that. Is there a suitable destination for these assets? Can the donor afford to give them away? So coming back to the point I just raised. Is the time right to do it? And there’s various factors that feed into timing and then the tax side. So those four factors coming back to destination, I think there it’s about thinking who is going to take these assets, if you’re giving things away, got to give them to somebody. Lots of people will be in the fortunate position that they’ve got a next generation possibly already involved in the business or ready to step up, in which case there’s good sense in passing value to those people.

As long as you get everything right with the pre-nups and post-nups that Hannah described, that’s a really great thing to be able to do. But if you haven’t got a suitable next generation, or maybe the next generation aren’t quite ready, they’re too young, or you’re not quite sure whether they’re going to be able to manage the business, people need to look at trusts. And trusts can still play a really important part in estate planning. And I don’t want to go too far into the detail of what the draft legislation says about how trust is going to be taxed. But I think the big headline picture is, if people do want to create trusts as part of this giving away assets, they really have to do that before the 6th of April, 2026, because from that point onwards, they won’t get the benefit of 100% relief on an unlimited value. You could still give away a million pound to a trust after the 6th of April, 2026, but that’s coming back to our sort of concept of giving away a meaningful value in the context of a very big business, a million pound may not actually be very, large chunk of that asset value.

So do think about about trusts where either there’s a group of beneficiaries and it’s not quite clear which of them, if any, may step up and become involved in the business, or actually the purpose of the trust is to hold wealth without those people becoming involved in the business. The trust may be there to preserve the value of the assets. I think Guy, you talked about this in the last pod, the difference between ownership and enjoyment of an asset or the income from it.

Affordability, we’ve already talked about, it’s the balance between income in the short term and capital value in the long term and making sure the donor has enough. But timing is important in that as well. Clearly, some of our landowner clients are definitely going to be too young to be thinking about this and too young, it means different things for different people. But I suppose the main thing for business owners and landowners who are you know, maybe in their 40s or 50s might feel that the priority is maintaining control and ownership for the business in their hands and doing their tax planning a bit later on. But at the other end, there are going to be some people for whom it’s too late. And this is one of the really challenging things about this hard stop on the 6th of April. As I said earlier on, if you survive for seven years from making a gift, it’s outside of your inheritance taxes estate. But if you’re unlikely to survive for seven years, then you may, there may not be, there’s a balance to be struck between capital gains tax uplift, which you would get if you held the assets when you died versus the potential inheritance tax saving, which if you’re of an age, you may not actually get. So I think timing in sense of the age of the donor is really important.

And then finally, the tax considerations around giving those gifts away, particularly in the context of a land business, you’ll probably have a mixture of assets which are used in the trade, so in land businesses that’s typically farming, but it might also be things like a farm shop or some sort of energy business. But you’ll typically also have some investment assets, typically let cottages, but it could be let land as well. And the tax that we look out on gifts as well as inheritance taxes, capital gains tax, and the reason I bring up that distinction between the trading assets and investment assets is that capital gains tax relief can apply to trading assets when you give them to an individual, but not to investment assets. So you need to be quite careful about what you’re actually giving away or what can be given away tax efficiently. It may be tax efficient to give away assets, even if there is a CGT charge, but you do need to have a careful think through what’s what and what you can give away in a tax efficient manner.

Guy Broadfield (13:19)

And Tim, to your earlier point, for those clients who are perhaps younger than others, insurance is often an option that is more affordable when it comes to managing or mitigating the effects of an inheritance tax charge on either respective lifetime gifts on death or assets they’ve retained on death. So something for them, those clients to consider, unfortunately, often not an option for older clients or indeed clients who’ve suffered health problems in the recent past.

So Hannah, Tim’s outlined there in quite some detail about the factors to take into account in respect of lifetime gifts or planning. From your experience on the family side, is it true that it’s now slightly easier to raise the topics of marital agreements with the next generation, historically hasn’t been considered a particularly romantic concept to discuss once two people think about getting engaged, but nonetheless an important one. Is it easier now, 10 years into this marital agreement regime?

Hannah Petherick (14:26)

I think it’s becoming more of a common conversation and it’s certainly something that we find that advisors are more comfortable raising in the same way that they would talk about wills and that sort of protection that they can talk about when making these gifts. How do you feel? Do you think, well, actually I’m giving this away and what will be will be and it’s a gift without reservation or do they feel really strongly they want to keep it in the family and often where you’ve got estates or land they feel strongly they want to keep it in the family. And so they can have this conversation at an early stage before there’s even necessarily partners involved and say, as a family, let’s agree now, we’re going to do this planning, but it’s only going to be on the basis that if and when you want to get married, we will all need to enter into prenuptial agreements to make sure that this asset is preserved on our side of the family.

And that intention is really important and you mentioned earlier Guy a recent case of Standish and this was a Supreme Court decision in July this year. I’ll just give you a brief outline of the sort of judicial history of this case. It was a 15-year marriage, proceedings started in 2020. Both parties had been married before and had adult children. The husband had retired in 2007 and had a huge amount of wealth. He was initially in the financial sector but bringing it back to the theme of our discussion today, he was later a cattle and sheep farming tycoon. He transferred in 2017, 77 million pounds to his wife, and that was part of an estate planning strategy. There was lots of evidence that that was all part of a wider plan and she was going to transfer those assets to the children but in fact what happened was in 2020 she started divorce proceedings with these assets in her name and at the time of the litigation they were worth £80 million. So the High Court decided their first decision was that the assets that had been transferred to the wife had become matrimonial property and that was sort of in line with what we expected because we had previously said to people, if you’re giving assets away to your spouse and it’s in their name, it’s become part of your matrimonial property and then it would be divided sort of aside from other arguments about pre-acquired wealth and inheritance and that sort of thing. If it was in your joint names, broadly it would be shared. The result of that was that wife received the 45 million pounds, which is 34% of the assets.

But they both appealed. The wife appealed on the grounds that she thought she should get more. And the husband on the grounds that he thought that the 2017 transfers should not become matrimonial property. The Court of Appeal agreed with him and they reduced the wife’s award by 20 million pounds to £25 million on the grounds that the assets transferred in 2017 had never become matrimonial property because there was a clear intention that they were going to be passed down to future generations. And the Supreme Court agreed with the Court of Appeal and upheld that decision.

So what that means is that where you’ve got these gifts being made, and if you can show a clear intention, and we would say that that should be by clear pre or post-nuptial agreements to explain what you’re doing and why, that assets transferred between spouses, which might be really a sensible thing to be doing for tax planning reasons in line with advice from you and Tim can be safe on divorce from being shared.

Tim Williams (18:10)

I think that’s a really interesting point, isn’t it Hannah, this idea that your prenuptial agreement and postnuptial agreements are an ongoing thing to keep coming back to. I know, actually as masses change, like Guy and I would say, you should review your wills when all this sort of significant financial shifts happen. It’s also really important that you update those agreements and documents as well.

Guy Broadfield (18:31)

So thanks very much, Hannah, for that important update following Standish. Tim, we’ve talked a lot about making gifts as a way to pass on value with a view to mitigating inheritance tax. But in some cases, clients won’t want to do that or not in a position necessarily to do that. And so they might focus instead on how to reduce the value of the assets they decide to retain. What options do you see, or have you come across recently when it comes to the question of suppressing value in an estate in a landed context?

Tim Williams (19:10)

It really depends on what structures there are in place and what the assets are. Where clients have got companies which might own all or part of an estate or a business, thinking about dividing the shareholding so that you might end up with minority discounts against shareholding. Now that does involve giving things away as you said Guy, but it’s giving things away in such a manner as to make the most of the minority discounts that you might have. And also by diversifying ownership, you might end up with multiple million-pound allowances. Because remember, your million-pound allowance is a sort of personal pot that you get set against the value of assets in your estate.

So the more people you’ve got, the more million-pound allowances you’ve got. Clearly, you can also make sure that the articles of association of the company or shareholders agreements reflect the intentions of the party. So make sure that you’ve got provisions around who can own the shares, who they can be transferred to, and that those dovetail with any pre or post-up agreements and wills and things that people have got as well.

So if you haven’t got a company, some things that people are looking at now are structures called reversionary leases. Now these have been around for quite a long time as an idea, but broadly the idea is that you, landowner retain your land and you grant a very long lease to somebody else, but that long lease is going to take effect after a given period of time has passed, say 20 years. The idea being that when you grant the lease, which is a capital gains tax disposal, it doesn’t have a huge value.

And you might give that into a trust for the benefit of the next generation where you might grant the lease to an individual. But the point being that over time, as the start date of that lease gets nearer, the value begins to move out of your freehold interest and into the leasehold interest. But because you gave away the lease on day one, your 7-year clock starts at that point. But the value of your estate doesn’t really change. But over time, the value of your estate reduces as the value of the leasing increases as it comes nearer its start date. Now that’s interesting in principle and can work in the right circumstances, but they are quite complicated structures.

Other things to think about are where you’ve got tenancies on the land. So lots of landowners over the years have sought to get rid of old style agricultural holdings act tenancies because they wanted to get land back in hand to improve their inheritance tax position or for business reasons as well. But actually, now landowners might want to keep these old AHA tenancies because they have a really big impact on capital value of land and the relief that the land gets is stuck at 50% anyway. So actually you’re no longer any really better off getting rid of your AHA tenancies and they also might cost you quite a lot of money to get rid of.

Guy Broadfield (21:51)

And worth bearing in mind, to your point on allowances, Tim, that pre commencement settlements or trusts that were created before the budget on 30th of October 2024 provided that they included relevant business property or qualifying land on that date will benefit from the £1million allowance. So worth considering whether any existing trust structures benefit from the one-million-pound allowance and how that might interact with any new trusts that people decide to create and run the numbers on the benefits of both keeping existing trusts and creating new ones. But that’s discussion for another time. Another pod.

So I think clearly we’ve covered a lot of points there in detail on both the tax and the family side, which is exactly what Death & Taxes and everything in between is about. But Tim, as we conclude for this part, what is your top  tips for landowners? What should they be thinking about before next April? And then Hannah, I will ask you yours.

Tim Williams (23:00)

Thanks Guy. I think my top tips would be, you know, start thinking very carefully if you haven’t already. If you have thought about it already, get on with doing what you’ve decided to do. But I think the key thing though is to take advice. I mean, there are lots of tax traps in all of this. I mentioned the CGT issues, but I think it’s not just tax advice from people like us. Guy, you mentioned financial planners, insurers, there’s quite a process here which does take time. So I think getting your house in order in a timely fashion is absolutely key.

Guy Broadfield (23:36)

And Hannah, you can say the same thing as Tim. I assume you agree with what he says. But what are your or any other thoughts as to what people should be thinking about ahead of next April?

Hannah Petherick (23:46)

I’d echo that, making sure that you’re really having the joined up advice so that you can evidence your intention of what you’re doing, why you’re doing it. And then it actually has the desired effect and you’re not wrong-footed by divorce or any other family event down the line. And I’d also say within the family, have those difficult conversations so that everybody is aware of what’s happening and what’s intended. So having those sort of family meetings now ahead of taking any action is also really important.

Guy Broadfield (24:22)

Thanks again for listening to this episode of Death & Taxes and everything in between, the Private Wealth podcast from Burges Salmon. You can listen to our previous episodes and get in touch with the team at Burges-Salmon.com or on our LinkedIn page. Keep an eye out for new episodes coming in 2025, focusing on individuals, landowners, business owners, and trustees. Our specialist team will bring you our views on the new rules and their practical implications for clients. So don’t forget to subscribe and thanks again for listening.