Farmers can use legal loophole to escape inheritance tax raid from Labour

Farmers can use legal loophole to escape inheritance tax raid from Labour

by · Birmingham Live

Farmers have been handed a way to navitage and mitigate the incoming inheritance tax raid from the new Labour Party government. Farmers have been urged to consider the so-called "most sensible option" to mitigate a bill after a "devastating" Labour Budget.

Philip Kirkpatrick, director at rural accountant Old Mill said: "There’s no getting away from the fact that these are huge changes, which are going to cause a lot of heartache. The important thing is not to panic: Take stock, ensure your accountant has a thorough understanding of asset values and ownership, and make a plan.”

Kirkpatrick said: “These changes are going to encourage people to hand on assets much earlier in life, which probably isn’t a bad thing for the industry. However, how the Government has chosen to do this is going to hurt some families – particularly those suffering unexpected deaths.

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“And early inheritance won’t suit everyone – each family and business situation is different, and the day-to-day implications must be considered, not just the tax benefits.” Farmers should consider life insurance and consider capital gains tax (CGT).

Life insurance is emerging as another viable solution, particularly for those concerned about dying within the seven-year gift window. "It could be an affordable solution," Kirkpatrick added. He said: "While gifts to spouses are tax-free, other gifts are liable to CGT, at 18 per cent (basic rate taxpayers) or 24 per cent (higher rate taxpayers).

“Holdover relief is one option, to defer the tax liability, and if it’s the donor’s main house, principal private residence relief can be available. If it’s a more comprehensive business restructure or sale, business asset disposal relief (BADR - formerly entrepreneur’s relief) may apply on gains up to £1m per person. Currently levied at 10 per cent tax, BADR will increase to 14 per cent from April 2025 and 18 per centfrom April 2026."