This is a subscriber-only article
Farmers across the UK have lambasted changes to inheritance tax reliefs announced by the Labour government.
Farmers have warned that the new tax thresholds will force future generations of farmers to sell land in order to pay the tax.
From April 2026, 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.
Irish Farmers Journal analysis shows that 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.
The tax burden 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.
Ulster Farmers Union (UFU) president William Irvine warned that the budget jeopardised farm family livelihoods, food security and the future of Northern Ireland’s biggest industry.
“This budget is a blow to our agriculture sector. The chancellor [Rachel Reeves] has failed to grasp the essential role our farming community plays in the UK’s food security, rural economy and environmental stewardship,” he said.
Last week, the presidents of the four UK farming unions wrote to the chancellor, urging the government to maintain inheritance tax reliefs for farm businesses.
“These changes to agricultural property relief (APR) compromise the liquidity needed for succession planning on farms of all sizes, eroding the very foundation of our agricultural sector,” he warned.
Barrier
The UFU is concerned the changes will create a barrier for new generations to enter farming and force many farmers to delay or even abandon reinvestment in their businesses.
“These adjustments may provide some marginal financial benefits to the treasury, but they come at a huge cost to farming families and the rural economy. Opportunities for new entrants and growth will be diminished,” he said.
He said that the changes made to the reliefs has shattered trust and signalled an “alarming disconnect between policymakers and the realities facing farmers”.
Breaking up farms
In England, National Farming Union (NFU) president Tom Bradshaw said it is clear the government does not understand that family farms are not only small farms and that just because a farm is a valuable asset it doesn’t mean those who work it are wealthy.
“Let’s not sugar-coat this, every penny the chancellor saves from this will come directly from the next generation having to break up their family farm.
Decisions to reinvest in these farming businesses will be shelved
“This is one of a number of measures in the budget which make it harder for farmers to stay in business and significantly increase the cost of producing food,” he said.
NFU Scotland director of policy Jonnie Hall has said the move will have a devastating impact on farms and crofts.
“The sheer lack of understanding of how agriculture works throughout the UK has been highlighted by this government, which has clearly gone back on its word,” he said.
“Changes to inheritance tax and agricultural property relief will affect the liquidity on succession for farms above the £1m threshold set, hitting many family farms, regardless of size or type,” the farm body warned.
“Decisions to reinvest in these farming businesses will be shelved and the knock-on ramifications for the wider rural economy and businesses up and downstream will be significant."
Lasting damage
In Wales, NFU Cymru fears the tax changes will cause lasting damage to Welsh farming.
NFU Cymru president Aled Jones said the changes are a threat to the family farm structure and the tenanted sector, as well as a threat to the nation’s food security.
“The sort of restructuring we are likely to see in response to these changes is likely to mean there will be less land available for tenancies and contracts, the lifeblood of small family farm businesses and a critical point of entry for young and first-time farmers,” he said.
SHARING OPTIONS: