Succession Planning for your farming business…

Now is the time to look at the succession planning for your farming business…

It may not seem it, but the current tax regimes for Inheritance Tax is relatively generous. This is certainly the case when they are compared with the ones that are forecast to come next year.

There is no Inheritance Tax to pay on gifts or bequests between spouses or civil partners. You can give them as much as you like during your lifetime, as long as they live in the UK permanently.

There is also no inheritance tax due on the first £325,000 worth of assets passed on death or chargeable assets given in life.

Reliefs are available for inheritance tax purposes for lifetime gifts of business and agricultural property. This also includes transfers into discretionary trusts.

People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death.

If the giver dies within 3 years of the gift, the recipient pays inheritance tax at 40% of the value when given. There is a reducing amount of inheritance tax due in the next 4 years and if the giver survives 7 years after the gift, there is no inheritance tax due on the gift. These are called potentially exempt transfers (PETs).

Currently, on death, there is an uplift of the value for capital gains tax purposes of assets left to family and other beneficiaries. If the estate has items such as property, these are treated as received by the beneficiaries at their value at the date of death. This reduces any capital gains tax due if they are subsequently sold.

At the moment, values are low, due to Brexit and COVID.

We all know that taxes will need to be raised to pay for the costs of COVID. The government have pledged not to raise income tax, national insurance contributions and VAT. So it needs to look at other means of raising revenue…

It has been proposed that PETs be removed, so gifts in life exceeding the exempt amount would be taxable on the recipient.

The amount that you can gift in life or leave in death without tax being due is currently £325,000. This amount may decrease.

Agricultural and business property relief is another area at risk. It may be that if these tax saving reliefs are available, the capital gains tax uplift on death may not be.

Lewis Brownlee can help you with your succession planning. We can sit with you (socially distanced, of course) and help you decide what you want to achieve. We will then work with you to make your succession plan as tax efficient as possible.

If you would like to discuss your options with us, or would just like to speak to one of our Agricultural and Horticultural Specialists you can call us on 01243 782 423 or head to our contact page and they will be in touch!