Various UK-based tax experts and advisers have gradually changed their stance on government plans to reform agricultural property relief (APR) from inheritance tax (IHT), Jeremy Moody from the Central Association of Agricultural Valuers (CAAV) has said.

“They are moving their position as they learn [about how farming operates]. I wish they had learned earlier,” Moody told a winter briefing for members of CAAV and the NI Rural Valuers Association (NIRVA) last Friday.

The key issue around proposed reform of IHT is the government claim that a new £1m APR threshold to apply from April 2026, effectively protects small family farms, with only the wealthiest 500 estates affected each year.

However, those figures are now widely seen as flawed, especially given that proposed IHT reforms also impact business property relief (BPR), with the £1m of relief applying across both APR and BPR combined.

Generational change

CAAV estimates suggest at least 75,000 UK farms have assets of over £1m. Assuming generational change every 30 years, it works out at 2,500 farmers per year, five times the government figure.

“Government has totally misjudged what is a small family farm,” suggested Moody.

As well as the “small lifestyle farmer” the other group not impacted by proposed changes to IHT are landowners “who don’t die” such as charities, large companies and big institutions.

“It hits the people they say they are protecting and it protects the people they say they are hitting – it is a very wrong way to do policy,” said Moody.

For those farms caught by new IHT rules, they can pay the tax over a 10-year period. However, according to Moody this could equate to rent of £250 to £300 per acre, per year over the period. “That crowds out your ability to invest in the farm – it is impossibly crippling,” he said.

The strongest reaction to the proposed IHT changes set out in the budget by chancellor Rachel Reeves, has come from the farming lobby. However, reform of BPR potentially impacts a lot of small, privately owned businesses, who will be subject to a £1m threshold for BPR.

‘Nasty shock’

The fact these small business owners haven’t raised the issue is due to a “much more immediate, nasty shock” that came in the form of a hike to employer national insurance, said Moody.

That change is expected to be the major contributor towards over £36bn in additional tax revenue. In effect, rather than raise money by going after the main taxes such as income tax, VAT, corporation tax or national insurance, the chancellor put the weight of the tax lift unto business.

While that might have technically fulfilled a Labour pre-election pledge not to increase taxes on working people, Moody fears it will damage small business, restrict much-needed growth of the economy and ultimately mean the tax yield will be less than predicted.

At the same time the British government committed to an additional £70bn of public spending in the October budget. “It is a large deficit. I think she [Rachel Reeves] or her successor, will be back looking for more. We can expect tax to increase in future budgets,” said Moody.

Despite the new leader of the British Conservative party, Kemi Badenoch, committing to reverse any changes made to IHT if her party gets back into power after the next general election, Jeremy Moody is not convinced.

“I would not build my business plan on the notion that the Tories will undo the changes in 2029. The policy will be bedded in for four years and I wouldn’t want the financial inheritance of the next government,” he said.

While the farm lobby has managed to keep the issue of IHT on the main news agenda and put forward a coherent argument as to why proposed reforms are unfair, it is hard to predict where the campaign will finish up, suggested Moody.

Like other experts in family farm tax planning, his advice is not to make a knee-jerk reaction to the potential changes and if possible, wait until all details are fully

known later in 2025.

But in the meantime, he said it would be good practice for all farm families to establish what names are on land deeds etc.

Joint names

“Clear the desks and work out who owns what.

“It is surprising how many times people think they own some land, which it actually is in joint names,” said Moody.