Planned changes to inheritance tax rules in the UK from April 2026 has led to a rise in farmers enquiring about life insurance cover, a financial planner has said.

Sean McCann from NFU Mutual said there are various options for farmers who want a plan in place in case their family is hit with an inheritance tax bill due to their untimely death.

Speaking to the Irish Farmers Journal, McCann gave the example of a 45-year-old farmer with a young family who wants cover until some of his children are old enough to take over the farm.

An option could be to take out term insurance that runs for 20 years and only leads to a pay out if the farmer dies within the pre-agreed period.

“It gives that farmer some breathing space that if, anything would happen to him, then his family have money to help pay any potential tax bill.

“It gives a degree of protection, so the family don’t have to sell assets, and the farm is preserved until the children are of an age to decide whether they want to farm it or not,” McCann said.

Term insurance pays out a pre-agreed amount of money, so the premium that the farmer pays in stays the same and so does the cover that would be paid out if he dies during the term.

However, land values tend to rise over time and whilst life insurance cover might pay any inheritance tax bill now, it may not be enough to pay a tax bill in 10- or 15-years’ time.

“If you want you could build in increases to it, so for example the cover goes up by 5% a year, and then the premium increases every year too,” McCann said. Another option could be to simply review the level of life insurance every so often to make sure it is enough to cover any potential inheritance tax liability.

In the above example, the farmer could take out more term insurance after five years so that it runs for a 15-year period alongside the first policy.

Trust advice

McCann said an important piece of advice which can be often missed is to make sure your life insurance policy is put in trust.

“If you don’t put it into trust, then the pay-out comes back into your estate and is included in inheritance tax calculations.

“It also speeds up the payment because we can pay out as soon as there is a death certificate, so we do not have to wait for probate,” he said.

Term insurance could also be an option for farmers who are succession planning now and want to transfer their assets to the next generation as a lifetime gift.

Under the so-called “seven-year rule”, inheritance tax is still payable if the previous owner of an asset dies within seven years of gifting it to someone else.

A key piece of advice that Sean McCann is offering farmers at present is to avoid making quick decisions due to the upcoming inheritance tax changes.

“You could take out a seven-year term insurance policy to protect against the tax on the gift. After the seven years, the gift is not included in your estate for inheritance tax,” McCann said.

Monthly cost

The cost of life insurance varies and depends on age and individual circumstances, such as any underlying health conditions. Illustrative figures from NFU Mutual show that a standard rate of term insurance for £100,000 worth of cover for a seven-year period costs £6.99 per month for a 40-year-old non-smoker. This rises to £12.25 per month for a 50-year-old, £25.53 for someone who is 60, and a 70-year-old pays £76.38 per month.

A different type of life insurance is a whole of life policy which pays out whenever the person dies and does not include any pre-agreed time period. This type of life insurance is more expensive, as the insurance firm is guaranteed to have to pay out at some point.

An example from NFU Mutual for a whole of life policy for £100,000 costs £84.77 per month for a 40-year-old non-smoker and £113.76 per month for a 50-year-old.

The proposed £1m limit on APR and BPR for inheritance tax applies to each individual and not the family farm as a whole.

For a 60-year-old taking out the policy, the monthly premium is £164.07, and it is £285.12 for a 70-year-old.

McCann said some life insurance providers offer reviewable policies which are usually cheaper initially, but the cost tends to get more expensive as the policy holder gets older.

“With the ones NFU Mutual provide, we don’t review the premiums. We agree on the level of cover and premium at the outset and then both those things stay the same throughout your life,” he said.

Avoid quick decisions for inheritance tax

A key piece of advice that Sean McCann is offering farmers at present is to avoid making quick decisions due to the upcoming inheritance tax changes.

He points out that the exact detail of changes to Agricultural Property Relief (APR) from April 2026 will not be known until later in the autumn when draft legislation is published.

“We have got a bit of time before this comes in. Don’t make any irreversible decisions just yet. When we see what this actually looks like in practice, then people will be in a better position to make an informed decision,” McCann said. One exercise that farmers could undertake now to plan for inheritance tax changes is to get an accurate understanding of exactly who owns what within a family farm.

McCann points out that this is important because the proposed £1m limit on APR and Business Property Relief is for each individual and not for the family farm as a whole.

“You can often find a whole patchwork of ownership across a farm. When you unpick it, you might find Dad owns some, Mum owns some, Dad and Mum own some together, and some land has been bought in a partnership with the next generation,” he said.

The financial planner said farming families should also get an understanding of the type of joint ownership that applies if any land is owned by more than one person.

He explained that there are two types of joint ownership, namely joint tenants and tenants in common. If you own property under joint tenants, then the property automatically goes to the other owners if you die.

However, with tenants in common, you can pass on your share of the property to someone else in your will.

“Once you understand who owns what and on what basis, then you can work out what happens on each death and start to plan,” McCann said.