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The 2024 Budget introduces major changes to farmers inheritance tax rules that will affect thousands of UK farming families. Starting April 2026, agricultural property worth over £1 million faces new tax charges that could force farm sales without proper planning. The Country Land and Business Association estimates these changes will impact approximately 70,000 farming families across Britain, making early estate planning crucial for farm succession.
The new farmers inheritance tax rules create a two-tier system that fundamentally changes how agricultural property is taxed Farms valued up to £1 million will retain full tax relief, protecting smaller family farms. However, larger operations face reduced relief on excess value, creating potential challenges for leaving a business in a will.
XWills helps farming families protect against inheritance tax through comprehensive planning and insurance solutions. Our integrated approach combines life insurance with expert trust setup and ongoing support, ensuring your farm’s legacy remains intact.Before exploring specific insurance options, it’s important to understand how life insurance can protect your estate:
Putting life insurance into a trust provides a tax-free lump sum that your beneficiaries can use to pay any inheritance tax bill, preventing the need to:
Our inheritance tax planning approach helps ensure your executors can manage your estate efficiently while protecting your farming legacy for future generations.
Life insurance proceeds are typically paid within weeks of death, while inheritance tax must be paid within six months. This timing difference helps prevent forced sales of farm assets to meet tax deadlines.
When properly structured in trust, insurance payouts:
For a £2m farm, to cover a £200,000 farm inheritance tax bill, two main insurance choices exist. (All prices quoted are approximate and based on healthy non-smokers):
Sticking with our example of a £2m farm, to cover a £200,000 farm inheritance tax bill, two main insurance choices exist. (All prices quoted are approximate and based on healthy non-smokers):
This policy guarantees to pay out whenever death occurs, providing lifelong protection. The premiums never change unless you choose index-linking:
– Age 20: £75 monthly
– Age 30: £95 monthly
– Age 40: £155 monthly
This policy provides coverage until age 90, with fixed premiums but only pays if death occurs before the policy ends. While offering less certainty than whole of life, it provides significant savings:
– Age 20: £15 monthly
– Age 30: £25 monthly
– Age 40: £40 monthly
– Whole of Life guarantees a payout whenever death occurs
– Term Insurance only pays if death occurs before age 90
– Whole of Life premiums are higher but provide certainty
– Term Insurance offers lower premiums but time-limited coverage
Agricultural property relief works through a carefully structured system designed to protect farming heritage whilst ensuring fair taxation. The first £1 million receives full relief, protecting the core farming operation. Additional value receives 50% relief, with standard 40% tax applying to the remaining amount.This creates an effective tax rate of 20% on excess value, making it crucial for larger farms to implement proper protection strategies.
Agricultural property relief works through a carefully structured system designed to protect farming heritage whilst ensuring fair taxation. The first £1 million receives full relief, protecting the core farming operation. Additional value receives 50% relief, with standard 40% tax applying to the remaining amount. This creates an effective tax rate of 20% on excess value, making it crucial for larger farms to implement proper inheritance tax planning.
Protection against inflation comes through index-linked policies that increase coverage annually. Whilst premiums also rise proportionally, this maintains real-world value of your protection against rising farm values.
Proper trust setup forms a crucial part of farm succession planning. XWills provides comprehensive trust documentation and setup services at no additional cost, protecting both your insurance benefits and broader farm legacy.
Working with XWills provides:
What is whole of life insurance and how does it work for farmers?
Whole of life insurance guarantees a payout whenever death occurs. The policy continues for your entire lifetime, with premiums remaining level unless you choose to index-link the coverage. This makes it ideal for inheritance tax planning as you can be certain the funds will be available when needed.
How does term insurance differ from whole of life insurance?
Term insurance provides coverage until age 90 at a lower cost, but only pays if death occurs before the policy ends. While less expensive than whole of life coverage, it carries the risk of no payout if you live beyond the policy term.
What are the benefits of having life insurance as a farmer?
Life insurance provides a tax-free lump sum that can be used to pay inheritance tax bills, preventing the need to sell farm assets or take out expensive loans. When written in trust, the payout remains outside your taxable estate and goes directly to your beneficiaries.
How much life insurance do I need to cover my inheritance tax?
For a £2 million farm, you would need £200,000 of coverage to fully protect against inheritance tax liability. This calculation is based on the new rules starting April 2026, where the first £1 million receives full relief and the remainder faces an effective 20% tax rate.
What happens if I don’t have life insurance when I pass away?
Without life insurance, your beneficiaries might need to:
Sell parts of the farm to pay the tax bill
Take out loans against the farm
Break up the farming business
Sacrifice valuable agricultural assets
How do I ensure my life insurance policy benefits my family?
The policy must be written in trust to:
Keep the payout outside your taxable estate
Ensure quick access to funds
Avoid probate delays
Provide immediate funds for tax payment
Can my insurance cover business debts as well as inheritance tax?
Yes, you can take out additional coverage to protect against both inheritance tax and business debts. We can help calculate the total coverage needed to protect all aspects of your farm’s future.
Is life insurance costly for farmers?
Premiums vary based on age and health status. For example, a healthy non-smoker aged 30 could secure £200,000 of term coverage to age 90 for approximately £25 monthly, while whole of life coverage would cost around £95 monthly.
How do I select the right insurance provider?
XWills works with FCA-regulated insurance partners to compare the market and find the most competitive rates. We consider factors such as:
Are there specific life insurance policies tailored for farmers?
While life insurance policies are generally standard, the key is structuring them correctly for farm inheritance tax planning. We specialise in setting up policies in trust and ensuring they align with your broader succession planning goals.
Don’t let farmers inheritance tax threaten your family farm’s future. Early planning brings better options and lower costs, with a £200,000 policy capable of fully protecting a £2 million farm.Our team understands the unique challenges facing farming families and provides practical solutions to protect your agricultural heritage. With proper planning and implementation, your farm can pass intact to the next generation despite the new inheritance tax changes.Remember that April 2026 brings significant changes to farmers inheritance tax rules. Acting now ensures the best protection at the lowest cost for your farm’s future.Contact XWills today for:
Through strategic planning and appropriate insurance coverage, farmers can protect their legacy and ensure their farms remain intact for future generations, despite the new inheritance tax changes.
The information provided in this article on what you should never put in your will is for general informational purposes only and does not constitute formal legal advice. While we strive to provide accurate and up-to-date information, laws and regulations may change over time. For your specific situation, it is always best to consult with a qualified professional who specialises in wills and estate planning. They can guide you through the process of properly drafting and executing your will, ensuring it is legally valid and tailored to your unique needs. Services like XWills.com offer expert will writing assistance from licensed professionals. Speaking with them directly will give you the personalised attention and formal legal guidance needed to achieve your estate planning goals and protect your legacy.
Co-Founder, CEO and Senior Will Writer at Xwills.com
Andrew Walters is the co-founder and CEO of Xwills.com, an estate planning firm that combines technology with personalised customer service to elevate the will writing experience. As a full member of the Society of Will Writers, Andrew is committed to upholding the highest professional standards in the field.
Driven by a passion for providing comprehensive support to clients, Andrew pursued formal qualifications in will writing and estate planning. This journey led to the establishment of Xwills, where he and his team fill a gap in the market by offering a tailored alternative to online-only will writing services.
At Xwills, Andrew ensures that each client receives the time and attention needed to understand their specific requirements. He strongly believes that something as important as writing a will should not be rushed or done without expert guidance.
As a member of the Society of Will Writers, Andrew adheres to their code of practise and continues to expand his knowledge through annual training.
His expertise, combined with Xwills’ commitment to customer service, positions him as a trusted resource for those seeking to protect their legacy and provide for their loved ones.
With his dedication to professionalism and personalised service, Andrew Walters is setting a new standard in the estate planning industry.
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