How farmers can evade Labour’s inheritance tax raid

Mr Tallon said: “This is a disappointment in the gifts. You can only do this if you can afford it. If you don’t need the capital or income that this farming element generates to live off of it.

“But while most farmers look asset rich on paper, they are cash poor and the returns themselves are very uncertain, so if they give up some of their assets, what will they then live on?”

Share the farm and get additional benefits.

One strategy family farms should consider, asset managers advise, is to take steps to increase the number of owners to increase the £1 million threshold.

A married couple who own a farm together can split it in two, meaning they will be entitled to £2 million in compensation for the agricultural property.

This is on top of the usual joint inheritance tax discount of £1 million if a married couple left their property to a direct descendant, meaning a farm worth £3 million could avoid paying inheritance tax altogether.

In theory, this process could be repeated many times, dividing the property among numerous family members to increase the benefit threshold.

However, Ms Marley warned there were risks.

She said: “This issue needs to be looked at carefully as there are commercial implications of involving a wider range of family members in the farming business.

“This adds further complexity to the business, including that already low profits or losses may have to be shared more widely and wider family members may be reluctant to participate.”

Life insurance

Another strategy farmers can consider is to take out a life insurance policy and attesting it to a trust. This will not prevent bereaved families from paying inheritance tax, but will provide a lump sum that sits outside your estate and can be used to pay tax.

A whole life policy provides security as it provides permanent coverage and therefore a guaranteed payout. However, such policies are much more expensive than term policies, which only pay out if death occurs within a certain period.