Beyond Downton Abbey: the legal issues facing modern Landed Estates
What is a Landed Estate?
“When you manage to pass a place like this down to the next generation, that’s a victory in itself”. These are the words of Lady Edith at the end of the latest (and final) Downton Abbey film, “Downton Abbey – The Grand Finale”. Words that ring true for most Landed Estates lawyers since it is the business of succession which occupies most of our time.
Downton Abbey is a quintessential example of what many of us envisage a landed estate to be – an historic mansion house, surrounded by extensive rural property, farmland and farm buildings, cottages and woodland.
Historically great swathes of the country were owned by a few hundred families; many gifted by the monarch in recognition of services given. The majority of estates were at the heart of their local community, providing employment and homes to those working on them.
Many landowners were instrumental in our industrial revolution because of the natural resources found on their estates, such as coal and minerals. Others travelled extensively and curated collections of artistic or historical importance which now form an integral part of our national heritage.
Once heavy taxation arrived from the mid-20th century (something referenced by Mrs Hughes early on and which forms the backdrop to events during “The Grand Finale”) and with greater personal freedom of movement and employment in the post-war era, estates began to fragment and diversify away from the traditional Downton Abbey model.
Today, a landed estate can mean much more than this. Many still provide a home for the family that has lived there for generations, but others are now lived in and cared for by new families who have seen success in business and have decided to take on the lifestyle and the challenges that come with it. Sometimes the manor house remains, sometimes it is long since sold off. Many estates retain their strong farming roots, but the financial security of the modern estate relies on not standing still, on diversifying and looking out for opportunities. From music festivals to wedding venues, adventure playgrounds to wind farms, commercial lets to affordable housing, the modern landed estate is constantly evolving.
Ownership
Rarely is a landed estate owned outright by a single person. Often, they are held in trust, sometimes multiple trusts might own a single estate. And there are a number of different types of trust which might be involved.
Estates that have passed down through generations are often held in strict settlements, governed by the Settled Land Act 1925. The underlying concept of a strict settlement was simple - to protect the family and the community supported by the estate. This was achieved by imposing a set of rules which governed the administration of the estate and its succession to the next generation. Over time those rules became outdated and inflexible. In particular, a strict settlement was normally founded on the concept of male primogeniture, which provided for the estate to pass down the male line (according to seniority) to the exclusion of female heirs – remember the reluctant arrival of Matthew Crawley (Robert Crawley, the Earl of Grantham’s distant cousin) who is heir to Downton Abbey because the Earl only has daughters!
No new strict settlements can be created since the introduction of the Trusts of Land and Appointment of Trustees Act 1996 but pre-existing strict settlements will continue to be governed by the old rules, until all estate land is sold. There is limited scope to make changes to a strict settlement, for example to provide for a female heir, but this often requires an application to court, which can prove prohibitively expensive.
Over time, for example, where an estate has been sold or new estate created, the strict settlement has been gradually replaced with ownership in a bespoke (flexible) trust and to a lesser extent, personal ownership or a corporate vehicle (company, limited liability partnership etc) or general partnership.
Today, we might see landed estates owned by working farmers, families, entrepreneurs, trustees, charities, pension funds and institutional investors.
How an estate is owned will influence how it can be run, the scope to diversify, how it can be passed to a successor/the next generation and underpinning all these factors, its tax treatment.
Identifying an heir/successor
Once upon a time, the concept of primogeniture made identifying an heir straightforward – it would be the eldest son, or in the absence of sons, the younger brother, and in the absence of male siblings, more distant male relatives (think Downton Abbey’s Matthew Crawley or the odious Mr Collins of Pride & Prejudice). With the nobility, the estate would usually follow the title. Now, while some families still prefer to apply male primogeniture, it is no longer a given. The eldest son might not be interested in running the estate and where the owner of an estate has bought it, rather than inherited it, there is a far greater likelihood that the heir to it will be the member of the next generation who is interested in it, wants it, and perhaps most importantly, has shown him or herself to be capable of running it.
What is clear is that the owner of a landed estate needs to put a succession plan in place early, and it is here that careful advice is required, both to make sure the estate passes to (or becomes held for the benefit of) the appropriate successor at the right time and in the right way. Ignoring this puts the estate at risk of being taxed on the death of the current owner (or beneficiary) in a less-than-optimal manner. Ignoring this also generates scope for family disharmony, as developing a succession plan in a timely manner can help to ensure that the whole family has time to think about, understand, and buy into that plan. Throughout Downton Abbey’s six series and three films this topic simmers away in the background never far from the hub of the action.
Taxation
The problem with a landed estate is evident in the name – the main asset is land. Land and buildings are very valuable, but illiquid. This means that when an inheritance tax liability arises, and especially if that liability is an unexpected one, paying it can be a problem. With limited cash, paying a tax liability that has not been planned for could impact heavily on the estate. It could lead to land having to be sold (problematic where an estate is being run as a cohesive whole – or put up as security for borrowing (again, problematic without a plan for repaying the borrowing, and particularly problematic if the only cash available is in the form of income which can’t be converted into capital)).
The ownership of a landed estate will influence its inheritance tax treatment:
If the land remains held in a strict settlement and has not passed from one generation to the next since before 2006, there is a good chance it will be treated as a ‘qualifying interest in possession’. What this means is that, on the death of the current beneficiary, an inheritance tax liability will arise (the prevailing rate of inheritance tax is 40%). Given the nature of a strict settlement, no spouse exemption from inheritance tax is likely to be available. Other reliefs may be available to reduce the tax liability, and they are touched on below.
Similar rules apply if the land is held on a more modern life interest trust that predated 2006, or a life interest trust created by Will before or after that date.
If the land is held in a discretionary trust, or certain other types of more flexible trust, it will be within the ‘relevant property regime’ for inheritance tax, which has the up-side of not imposing a tax charge on a beneficiary’s death, but the downside of inheritance tax charges at a lower rate every ten years and when asserts exit the trust.
Estates can also be held by companies, or by partnerships or limited liability partnerships. These all come with their own tax consequences, some beneficial, some not, but ultimately the inheritance tax risk to achieve succession to the next generation remains.
The activity carried out on a landed estate will also influence its inheritance tax treatment. Two incredibly important inheritance tax reliefs are Agricultural Property Relief (known as APR) and Business Property Relief (known as BPR).
With many landed estates using land primarily for farming, whether in-hand or tenanted, APR will currently help to reduce the inheritance tax liability in a lot of cases. But it is not a given. First, APR only relieves the agricultural value of the land. If an estate finds itself, through luck or judgment, with land that is suitable for development and has increased in value accordingly, that extra value will not be relieved by APR. Then, there are rules about how the land is used for agriculture. Land that is farmed in hand can qualify for 100% APR after two years of ownership, while land let to a third party for agricultural purposes will only be relieved after seven years, and then potentially only 50% of the value will be relieved (but changes are coming from 6 April 2026, as summarised below). Farmhouses need to be demonstrably farmhouses and farm cottages and buildings need to be occupied for the purposes of agriculture. It is not a straightforward relief, and advice should always be sought if it is intended to be relied upon.
Agriculture is a business and BPR may also be available, to relieve more than just the agricultural value of the land. Plant, machinery, working capital, the non-agricultural value of the land, all of these can potentially be relieved through BPR.
What about let properties? Many landed estates include residential lets, be they cottages no longer needed for farm workers, or whole villages, a legacy of the days when the landowner didn’t just employ all the local workers but housed them all as well. These properties do not benefit from APR, and normally owning and letting properties is treated as investment activity and not a business, but with careful planning it may be possible to demonstrate that the agricultural activity and the property letting activity form, not a series of discrete trading and investment activities, but a single, composite business, the whole of which should benefit from BPR. Known as ‘Balfour Planning’ after the leading case which concerned the Scottish estate of the Fourth Earl of Balfour, whether it will be successful or not is highly fact sensitive and depends on such things as there being a single management plan for the whole estate, the property side being less valuable and less income generative than the agricultural side, and the same employees working across all elements of the business. HM Revenue & Customs look at claims for BPR on a case-by-case basis and professional advice is necessary when undertaking such planning.
In April 2026 the rules on APR and BPR are changing which will significantly impact those landed estates that are currently sheltered by these inheritance tax reliefs. The increase in inheritance tax may lead to estates being fragmented as assets are sold off to fund the tax bill.
Up until now, owners of landed estates have been able to organise their affairs so that they die holding estate assets (possibly whole estates) which qualify for 100% APR and/or BPR with minimal or no inheritance tax paid. Consequently, estates have been able to pass to the next generation “intact”.
From next April, this kind of “succession plan” is no longer a complete solution. 100% APR/BPR will be capped at £1m per individual taxpayer. Any APR/BPR assets in excess of this allowance will benefit from 50% relief. This means above the available allowances; assets will be taxed at 20%. Certain trusts will also have their own £1m allowance.
Landed estates are not just about land. Often, and especially in the case of long-established estates which have been in the same family for generations, there will be significant collections of art and items of historic and even national interest. Sometimes the values involved can be eye-watering and can dwarf the value, not only of the building containing the collection, but potentially the estate as a whole. Clearly such values cannot be relieved by APR, but sometimes BPR can be available. Where the mansion house is open to the public, or used for events, art and artefacts can be a necessary part of the visitor experience, so all may not be lost from a tax point of view. If there is no business in which the chattels are used, items of the highest quality and importance can be exempted from inheritance tax in other ways. Conditional exemption will take items out of the scope of inheritance tax, on various conditions, including that they be made available to be seen by the public. The acceptance in lieu scheme can be even more generous but does require the items to be ‘sold’ to the nation, as a form of tax payment in kind.
Protecting the Estate for the Future
For the majority of estates, the chosen successor (or entity) will assume a ‘custodian’ role, rather than receive an asset windfall. The chosen successor will become the person ‘in charge’ for a period of time, capable of making changes to achieve his/her own vision for the estate, but the legacy of their custodianship will dictate the financial viability of the estate for the next generation (and beyond).
In our experience the succession plan should double-up as a business plan, setting short-, mid- and long-term objectives that are constantly reviewed.
The death of the current owner (or custodian) should not be a cliff-edge event, but the final stage of a handover of responsibility (and control) that has been achieved over many years. The issue presented by Rachel Reeves’ 2024 Budget is that it has created a “cliff-edge” event, undermining many landed estates’ carefully considered, long-term succession (and business) plans. Not only is this detrimental to landed estate owners, it also negatively impacts those that are connected with a landed estate. Think of all the characters that depend on Downton Abbey; the tenant farmers, the village hospital, the local community. With the modern landed estate often involved in an even more diverse range of enterprises than their historic counterparts, they continue to provide employment opportunities, as well as supporting direct and tenanted farming opportunities and associated business, energy or industrial activities - the impact may be even greater.
What next?
We will be watching closely to see what the 2025 Budget brings. In the meantime, if you’d like to discuss your succession planning needs and how we can help you, please contact Katie Talbot or Hannah Wall.
More information about what we know about the APR/BPR changes so far, and what we might expect from the budget can be found in the articles below:
Update on the Autumn 2025 Budget speculation for farmers, landowners and business owners
Field Notes is Charles Russell Speechlys’ weekly agricultural law blog, sharing plain-English insight into the legal and policy issues affecting agriculture, agricultural land and rural business life. From hints and tips on avoiding agricultural disputes, pitfalls to keep an eye out when planning for tenancy or family agri-business succession, to the latest agricultural legislative or policy changes and the most interesting farm-related court decisions, Field Notes makes the complex more understandable, always grounded in the realities of life on (and off) the land.
Field Notes comes out every Wednesday. Previous editions of Field Notes:
- Agricultural Tenancies: Navigating Michaelmas and Anticipating Future Trends
- Unkept Promises: The Evolving Landscape for Proprietary Estoppel Post-Guest v Guest
- One Year On: Agricultural Holdings Act 1986 succession after the Agriculture Act 2020 reforms
- Cheltenham: Where Clarkson Meets Covenants
- Arbitration Act 2025: what it means for farmers, landowners and rural disputes
