UK farms to face huge inheritance tax bills

Farms across the UK will face huge inheritance tax bills from April 2026 under plans unveiled in the Autumn Budget.

UK Chancellor Rachel Reeves confirmed on Wednesday that Agriculture Property Relief (APR) for inheritance tax is to be overhauled.

A tax-free threshold of £1m will be available to agricultural properties, with a 20% tax rate applying to the value of assets after that.

Taxation is not a devolved matter in the UK, so the changes to inheritance tax will affect all parts of the UK, including NI.

It means for a typical 100ac farm valued at £1.5m (£15,000/acre), an inheritance tax bill of £100,000 will be payable when the property is passed on when the previous owner dies.

Tax bills will be much harsher for larger and higher value farms. For example, a 300ac farm valued at £6m (£20,000/acre) will see an inheritance tax bill of £1m.

At present, APR allows most farm businesses to be exempt from inheritance tax when the farm owner dies.

The changes from April 2026 are likely to have a major impact on succession planning on farms across the UK.

The biggest concern will be that farm families will have to sell off parts of inherited farmland to help pay inheritance tax bills.

This could have a significant impact on the land market if it leads to an increase in the area of land being offered up for sale.

More farmers are likely to consider passing on farmland to the next generation during their lifetime.

However, the so-called “seven-year rule” is to remain unchanged, so inheritance tax can still apply if the previous owner dies within seven years of giving away their estate.

Issues with the likes of capital gains tax can also apply to lifetime gifts in some cases.

Farm payments

Exact details on the amount of funding that will be available for farm support schemes from next year onwards were unclear in the immediate aftermath of the Autumn Budget.

Farming Minister Daniel Zeichner said an annual budget of £2.4bn is to be made available for schemes in England over the next two years.

The figure is broadly in line with the previous funding allocation for agriculture in England, which raised expectations that the allocation for NI could be maintained at around £330m.

The UK Treasury did confirm on Wednesday that funding for agriculture in devolved regions from 2024/25 is to be “baselined” into each region’s block grant.

However, from 2025/26 onwards, NI will no longer receive a ring-fenced budget for agriculture which can only be spent on farm related schemes.

This is likely to mean that NI farming will have to compete with the likes of health and education at Stormont for funding allocations.

Given the ongoing financial pressures across Stormont departments, there is a significant risk that less funding could be available for NI farmers over the coming years.

Muir concern

Commenting, Agriculture Minister Andrew Muir told the Irish Farmers Journal that the Autumn Budget had “created real uncertainty and concern” due to changes with inheritance tax and agricultural funding.

“I will be seeking urgent clarity on future funding support and implications of inheritance tax changes. “The potential loss of ring fenced agricultural funding is a major change that will create significant and legitimate worry and angst within the farming community,” he said.