Inheriting Farmland in the UK: What Happens For Landowners
 Topic: inheritance tax |  Read Time: 9 mins |
 Landowner type: Independent landowners |  Energy:Offshore wind | Solar |
15th November 2024Are you inheriting farmland in the UK? Or do you need clarification on how the probate process works as a landowner? Whether you’re a beneficiary or a landowner with assets, I’m here to guide you through everything you need to know.
Nobody particularly wants to think about leaving their loved ones behind. But if you’re a landowner with significant assets, you need to understand the ins and outs inheriting farmland in the UK.
It can be a complex and multi-layered process, so getting your affairs in order early is the greatest gift you can give. On the one hand, this’ll make the lives of your beneficiaries far more manageable when applying for probate. But it’ll also give you great peace of mind. And that’s priceless.
To write this article, I’ve teamed up with probate solicitor Sam Dale. Currently working in the Sandbach office of Butcher & Barlow LLP, he’s an expert in Wills, Trusts and Estates.
Samuel Dale
Solicitor and Partner at Butcher & Barlow LLP since 2010
LinkedIn
Covering the importance of wills and a rundown on the probate process, our ultimate guide to inheriting farmland in the UK is here to help.
Before the Probate Process Begins – Preparing a Will
If you’re passing land on after your death, the first thing you’ll need to think about is making a will. To make things as easy as possible for your executors, try to carefully plan your succession, get your affairs in order and be clear regarding your intentions after death.
I work with several farming clients who wish to have their immediate family take over the existing business. However, I’ve also worked with commercial farmers and a handful of lords who may have different plans for succession. So, it’s all about getting your unique affairs decided and in order.
Having a solid plan will reduce the risk of jeopardising a farming business. It will also minimise the possibility of conflict among your beneficiaries.
Now, doesn’t that sound appealing?
Why is a will so critical?
Creating a will is crucial if you own any farmland in the UK. It may seem like a given for anyone with significant assets. But you’d be surprised at how uncommon wills still are in the UK.
A study that Canada Life carried out in 2024 revealed that a shocking 57 per cent of UK adults don’t have a will. This figure equates to 33 per cent of adults aged 55 and above. To make matters worse, 12 per cent of these individuals had no intention of making a will in the future.
Many believed they had all the time in the world to make a will or didn’t have enough wealth to justify one. Others assumed their family would automatically inherit all assets, making a will redundant.
Around 14 per cent of those surveyed stated that they found the process too complicated and needed help figuring out where to start.
The importance of succession planning
I briefly mentioned succession planning earlier, but let’s dig a little deeper.
Succession planning allows a business to continue running smoothly after someone dies. A well-considered succession plan will detail exactly how your assets should be managed while minimising conflict.
Wondering why this is important? It’s because the plan lets you proactively outline what you want to happen with your land. This process makes your dying wishes clear to any executors, reducing the risk of arguments arising from uncertainty.
Succession planning can often be quite complex, especially regarding farmland. This is mainly because you’re typically dividing a farm and sharing it between several beneficiaries. The inheritance process becomes even more complicated if your farm has several branches or is hosting a renewable energy project.
For example, one family member may be critical to running the farm. Another may want their cut of the profits from selling the land that the farm sits on.
You may also be dealing with the distribution of a trust or be looking for a way to distribute ongoing income from a wind or solar farm fairly.
In these complex cases, you must speak with a professional to ensure appropriate succession planning.
What about potential disputes?
Even with proper succession planning, families may need to split assets unequally. This could occur if one family member bears the majority responsibility for the land.
Dividing assets unequally among beneficiaries can lead to conflict. However, a well-crafted will can help solidify your final wishes and reduce the potential for disagreements.
Just remember that beneficiaries can contest wills. Even with a solid accountant and solicitor on side, disputes over wills are becoming more and more common during the probate process.
In fact, an IBB Law study found that three in four people are likely to experience a will, inheritance or probate dispute in their lifetime (AKA: a solid majority).
It’s also tricky if solicitors are dealing with homemade wills, as they can be prone to allegations of third-party interference. The average cost of a will is just £150 to £250 on average. So, it makes little sense to take the risk of a homemade document in the long run.
The Probate Process
The probate process is essentially the legal process of administering and distributing an estate after a person dies.
During this process, an executor takes on the legal right to deal with someone’s property, money and possessions (AKA: their estate).
The people who are set to receive the assets from an estate are called the beneficiaries of an estate.
1: Dealing with Post-Death to Apply for Probate
Before an executor can apply for probate, someone must register the death and obtain a valid Death Certificate. Registration must be carried out within five days of a death and provides the necessary documentation for the probate process.
At this point, it’s also wise to notify banks, financial institutions and any other relevant businesses to stop outgoing payments. While many people keep detailed lists of where they hold their assets, solicitors will need to locate them if no such list exists.
2: Valuing the Estate and Assessing the Will
A will makes the probate process far more straightforward, ensuring all assets go to the beneficiaries they’re intended to reach. But if there isn’t a will, the law decides who will inherit the assets.
This is when you’d need to apply for a Grant of Letters of Administration.
The Grant of Letters of Administration is an official document from the Probate Registry that gives an administrator the power to manage the affairs of someone who has passed away. The Grant of Letters of Administration is usually applied for by a spouse, immediate family members or close relatives.
The assets will usually go to surviving family members. If you’ve been living together for a long period but haven’t married, this wouldn’t be recognised in the eyes of the law for inheritance purposes. It’s unfortunate, but it’s simply how the law currently stands.
The assets will be divided according to the UK’s intestacy rules This can mean that, in certain circumstances, distant relatives could inherit. If there aren’t any surviving relatives to pass the assets to, the person’s estate goes to the Crown. From here, HM Treasury will be responsible for the estate.
How is the estate valued?
In terms of valuing the estate, the executor will usually need to go to the deceased’s property and assess their accounts. This is particularly critical if you’re inheriting farmland in the UK with a renewable energy project on it. That’s because this may add significant value to the property (due to the potential income from the lease).
The valuation process also involves sifting through documents detailing accounts, investments and any other property to get an idea of the value of assets upon their death.
During this period, executors will also look at any outstanding debts or liabilities the deceased may have incurred while alive. These will need to be repaid from the estate before the remaining assets are divided amongst the beneficiaries.
3: Complete IHT Return
Once the estate is valued, the inheritance tax portion of the probate process comes into play.
If there’s no inheritance tax due (so, the estate is less than £325,000, or potentially £650,000 if you have a spouse that predeceased you), there may be no need to complete a comprehensive inheritance tax return. If tax is due or if the gross estate exceeds the above values, you must submit an inheritance tax return to HMRC (known as an IHT400 form).
On the IHT400 form, you’ll need to detail any lifetime gifts within seven years of death. You may also need to offer information about family and friends who received gifts during this period. The form also requires you to detail valuations of the estate using property, bank accounts and any other assets.
Inheritance tax is typically paid from the estate using liquid assets and should be paid within six months of the date of death. Otherwise, you’ll need to pay interest on the inheritance tax calculation.
What Happens If You’re Inheriting a Farm as a Business?
Executors assessing farmland in the UK that currently runs as a business may want to look at whether they can benefit from Business Property Relief (BPR) and Agricultural Property Relief (APR).
If the deceased has set up adequate succession plans, transferring the business based on the wishes of a will should be relatively straightforward. But if the business qualifies for BPR or APR, you’ll end up paying far less tax on the estate than you would otherwise.
Business Property Relief (BPR) is a valuable relief for business owners and can come in at either 100 per cent or 50 per cent. However, it only applies to businesses that are actively trading and run as a single, composite entity.
For this reason, I recommend that landowners look closely at how their business is being run before death. Consolidating all accounts and ensuring all transactions are run through a single account can make BPR far easier to qualify for.
4: Apply for a Grant of Probate and Pay Fees
Once the inheritance tax requirements have been addressed, the executors can apply for a grant from the Probate Registry.
Once you apply, it typically takes between three to six months to receive the Grant. However, if you don’t have a will, beneficiaries can sometimes expect to wait up to 10 months.
When the Probate Registry issues the grant, the executors can then deal with the administration and distribution of the estate.
If there is no will and you are a beneficiary inheriting farmland in the UK, you’ll need to apply for Letters of Administration. This allows you to enact and benefit from intestacy rules.
5: Settle Outstanding Debts and Allocate the Estate
If you’re inheriting farmland in the UK, the executors will first settle any debts the estate owes before giving all relevant assets to the beneficiaries listed in the will.
The probate process usually takes six to 12 months for basic cases with clear beneficiaries. If a property needs to be sold and the profits split between beneficiaries, the process can take two years in some cases. The process can take even longer if the estate is particularly complex.
Realistically, if you’re inheriting farmland in the UK, you need to be prepared for a relatively long process. Between valuing land, applying for a Grant of Probate and divvying up assets at the end of the process, patience is indeed a virtue here.
It’s also important to budget for the probate process. While creating a will is relatively affordable, the probate process can become costly, especially in complex cases. Therefore, it’s wise to factor in these potential costs when evaluating the net value of the assets beneficiaries will receive.
There You Have It: The Ultimate, Step-By-Step Guide to Inheriting Farmland in the UK
As you can see, the probate process can be relatively drawn out and complicated. That’s why I always suggest seeking expert help and sorting out succession planning well in advance.
Oh, and remember to make that all-important will that’ll make the lives of your executor and beneficiaries much easier.
If you have any queries about how to get a renewable energy project on your land or want to streamline your approach to succession planning, get in touch. At Lumify Energy, we’ve helped countless landowners boost the overall income from their land and maximise their rental payments by securing excellent deals that align with market rates.
