New analysis by DAERA has found that almost half of all NI farms covering 80% of the total land area could be impacted by planned changes to inheritance tax.

The assessment looks at how many farms will breach the proposed £1m limit for Agricultural Property Relief (APR) based on the value of land, yards, houses, livestock and machinery.

The department found that the affected farms contain 93% of all dairy cows in NI, as well as 70% of the local suckler herd and 72% of all ewes.

Over the limit

In a scenario where a farm is split between two individuals to allow APR worth £2m, DAERA found that 24% of NI farms will still be over the limit.

These farms make up 58% of the NI farmland area, 73% of all dairy cows, 43% of sucklers and 50% of all ewes.

UFU president William Irvine said the UK-wide tax will have “a disproportionate impact” in NI due to higher land values and more farms being owned by one person.

“It skews the effect of this and leaves NI vulnerable,” he told MPs in Westminster on Tuesday.

It was a point backed up by the Central Association of Agricultural Valuers (CAAV) during a meeting with a different committee of MPs the next day.

“In England, 46% of farms are solely owned by one person. It’s probably a higher fraction in NI,” acknowledged Jeremy Moody from the CAAV.

Caution

In his evidence, tax lawyer Stuart Maggs urged caution when it was suggested that more farms should split their ownership across various individuals to get multiple APR allowances.

He said this could lead to more complicated succession plans and will make it difficult for farm businesses to secure loans.

Maggs argued that whilst there are steps available to avoid inheritance tax, it is “a little disingenuous” to suggest that the only farms affected by the changes will be those that are eventually hit with tax bills.

He said eliminating inheritance tax liabilities will involve spending “thousands if not tens of thousands” in fees to lawyers, accountants, land agents, and valuers.

“Even with that, the people who are going to get caught with this are those who die early, those who can’t plan and those who are unfortunate. By any measure, that has to be a bad way to draw up a tax,” Maggs said.

Impact of £1m APR on NI farms updated

Previous analysis by DAERA which solely looked at the average price of bare land found that 36% of NI farms could be over the £1m APR limit.

The new assessment builds on this by using data from the Irish Farmers Journal annual land price survey to give a value to dwelling houses and farmyards.

It also includes estimates of “working capital” from DAERA’s annual farm business survey which covers the value of livestock and machinery.

Taken together, all farm assets which will be subject to inheritance are estimated to be worth £21,000/acre in April 2026 when the changes are due to take effect.

On this basis, it means a farm will need to own just under 48 acres to surpass the £1m APR limit.

Of the 12,801 farms in NI that this applies to, 72% are beef and sheep farms, 17% are dairy units, 5% are arable farms.

DAERA acknowledge that the analysis does not reflect the likely impact on pigs, poultry and horticultural businesses as “non land assets” will have a greater bearing on total farm values.