With personal allowances frozen, various stealth taxes introduced by government and people in danger of getting caught in tax traps, there has never been a more important time to look at your finances and protect your wealth – a leading financial adviser has suggested.

Addressing farmers in Dungannon, Sean McCann, from NFU Mutual, highlighted that until 2028, the tax-free allowance will remain at £12,750, the higher tax threshold will stay at £50,720, while the likes of the inheritance tax threshold will remain at £325,000.

However, if the personal allowance tracked inflation, it should probably be in the region of £14,700 by 2028, while the higher rate band would be just under £59,000.

“By inflation we are getting caught in more of these traps,” said McCann. He emphasised that every situation is different, and it is important to seek professional advice, but for those who don’t already pay into a private pension, he maintained it is something to carefully consider.

“Pensions are an incredibly efficient way of saving tax,” he said, pointing out that government effectively adds 20% to all pension contributions by way of basic rate relief. But for a higher rate taxpayer, as well as the 20% contribution coming from government, they are also able to claim additional tax relief of 20% back through their tax return (on the amount put into the pension on which they paid 40% tax). It means that for every £100 in the pension pot, the net cost is effectively £60.


The most that can be paid into a pension in a single year, while still getting tax relief, is related to earnings (you can’t pay in more than you earn) and has recently been increased to £60,000.

There is also the option of starting a pension for children or grandchildren, with the maximum amount set at £2,880 per child, which when government tax relief is added, comes to £3,600 per year.

“It is setting the stone rolling for them for future years,” said McCann.

He maintained that some farmers set up a pension fund with no intention of ever withdrawing money, with it instead being left to non-farming children.


At present, private pensions cannot be accessed until you are 55 years old, and this is increasing to 57 in 2028. At this stage it should be possible to take out 25% of the pension pot as a tax free lump sum.

Everything in a pension pot is normally exempt from inheritance tax, and if you die before 75 there is usually no income tax on money taken out by beneficiaries. If someone dies aged over 75, beneficiaries normally pay income tax at their own tax rate on anything they take out of the fund.

However, not all pensions allow beneficiaries to leave the money in the fund and take regular withdrawals from it – instead some older pensions only pay a lump sum on death, which could have major tax implications for beneficiaries if you die aged over 75.

“It is worthwhile checking your pension – if they have to take it all out, they lose out,” advised McCann.


It is also possible to switch your pot of money into a self-invested pension, which gives you more control over investments and can include using the fund to borrow money or purchase land. Where land is purchased, it remains in your pension fund and if you are farming it yourself, you pay a commercial rent into the fund.

Inheritance tax – traps and generous reliefs

On wider issues of wealth management, McCann emphasised that everyone’s situation is different and it is important to take professional advice.

“Inheritance tax for farms and businesses comes with generous reliefs, but also a lot of traps as well,” he said.

Above the tax-free threshold of £325,000, remaining assets are taxed at 40%. However, anything given to a spouse is exempt, so effectively a couple have £650,000 of allowances to pass on to children.

In addition, since 2017 there is an extra allowance of £175,000/person on the value of the home, although this must be left to a direct descendent, which is unfair on those without children, said McCann.

To qualify for agricultural property relief (APR) from inheritance tax, you must have owned and farmed the land for at least two years and still be farming on death, or if in conacre, it must have been owned for at least seven years and still be in agricultural production.

The farmhouse comes under APR, but must be the centre of farming operations and proportionate in “nature and size” to the farming activity taking place.

“You can get into problems if the older farmer is in a care home and the house is empty. I have seen this happen – take advice, it is avoidable,” said McCann.

Business property

As well as APR, there is also 100% business property relief (BPR) from inheritance tax, although McCann pointed out it only applies to a trading business, not an investment business.

“If you diversify into things such as a workshop or letting a shed out for caravans and are picking up rental income – it looks like a buy-to-let and won’t qualify for relief. Again, take advice – there are ways and means around it,” said McCann.

Development potential

Where land has development potential, APR will only cover the agricultural value, but if you are actively farming the property, BPR should cover the enhanced value.

However, if the land is in conacre there is potentially no relief from BPR, so it is important to keep farming it yourself until a decision is made, he added.

McCann also urged those who are in a business partnership or a company with a relative to have a partnership agreement in place, which sets out clearly what will happen if a partner dies, gets ill or wants to retire.

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