Farming families caught with a future inheritance tax (IHT) bill run the risk of having to pay high rates of interest on overdue payments, the president of the National Farmers’ Union (NFU), Tom Bradshaw, has said.

Addressing a House of Lords committee, the NFU leader pointed to the government commitment that any IHT due by farmers when new rules apply from April 2026 could be paid in equal instalments, interest-free, over 10 years.

However, the first IHT instalment is due six months after the death occurs, and if this payment is late, the current rate of interest is 8%, which accrues daily.

ADVERTISEMENT

In his evidence to the committee, Bradshaw argued that it is ‘completely unrealistic’ to expect assets to be valued and probate to be completed within just six months, especially given the complexity that is involved when valuing a farm business.

“If probate has not been granted, what is the valuation? What is the bill? You do not actually know what you are supposed to pay before that first payment. Are you going to make a payment on account?” he said.

Also giving evidence, Jeremy Moody from the Central Association of Agricultural Valuers (CAAV), clarified that it is the deceased person’s valuer who will value the assets and then it will be up to the valuation office to consider whether the figure is correct.

“That is where, again, you hit an issue as to the capacity for that to be dealt with,” said Moody.

Forestalling

The other main issue raised with the committee was the implication of ‘forestalling’ whereby government has insisted new IHT rules will apply to any lifetime transfers made on or after 30 October 2024 (when the policy was announced), if the farm owner dies after 6 April 2026.

The example used by Bradshaw is of a farmer diagnosed with cancer in February 2025, who has considered not accepting treatment because he thought his family would be better off if he died before the new IHT comes into force next April.

Under the rules that existed to the end of October 2024, the farmer could gift his land to his family in the hope he would be able to rely on the seven-year rule – if he lives seven years, the land is considered to be outside his estate. If he dies within seven years, the land could come back into his estate and still avail of APR.

The ‘forestalling’ clause prevents APR being used in this way. If the farmer dies before 6 April 2026, full APR is still available, but if he dies after that date, the extent of the IHT liability will depend on how long he survives, given that the seven-year rule is a tapered relief.

“There is a trap that has been set, which is absolutely unforgiveable and which penalises the elderly,” said Bradshaw.

He also recalled a case of a farmer with dementia. Given his mental state it is not possible to change the will to make use of the seven-year gifting rule.