The importance of knowing the value of your farm
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Last month’s announcement that the Agricultural Property Relief (APR) and Business Property Relief (BPR) cap would be increased from £1 million to £2.5 million.
Coupled with the Budget announcement to allow the allowance to be transferred between spouses, will have been welcomed by many family farms – but the spectre of an inheritance tax bill still lingers, including for many farmers who may not realise the value of their assets.
Since the unveiling of the original £1 million cap in the 2024 Budget, there has been a significant amount of work done in the farming sector on restructuring. Even for those farms which will now fall within the new, higher cap, this work will not have been entirely in vain; there was probably a need to concentrate the mind on succession.
There is some evidence that farmers in their 50s might be hanging on for another three and a half years in the hope that a change of government will result in the reversal of Mrs Reeves’ policy. Although there are promises of the policy being scrapped, the ‘genie is out of the bottle’ and it may be unlikely to be put back in. A new government might increase the allowances, but maybe the days of unlimited 100% APR and BPR are over.
Because of this, we will see far more thorough valuations undertaken by the District Valuer through the Capital Taxes Office, and this is likely to throw up some unpleasant surprises for those who might have thought the new cap – which, if able to be shared between spouses and added to existing IHT allowances, could be as much as £6 million – will not apply to them.
The truth is that once you factor in record high land values, farm buildings, the farmhouse, machinery, livestock, crops in the ground, and stock held, even fairly modest family farms could still be facing an inheritance tax bill.
When the cost of new combine harvesters and tractors have a value of anything between £¼ million up to £¾ million, it doesn’t take long before the value of machinery alone can reach seven figures. As an experienced auctioneer, I regularly see how much value sits within machinery and equipment on farm.
And don’t forget that for APR purposes, it is not the book or balance sheet value of the assets which is assessed, but its market value, which in many cases can be much higher.
It has never been more important to know accurately the value of everything on your farm. Avoiding a costly inheritance tax bill, which could even end up forcing the sale of the farm, could depend on it.
Simon Evans is agricultural partner at Arnolds Keys.
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