Initial analysis shows over 75% of NI farms fall below the new £2.5m inheritance tax relief limit for individuals, and more than 90% are under the £5m limit for married couples.

The findings come from an assessment of available data by the Irish Farmers Journal which builds on a report that was published by DAERA last year.

The original DAERA report found that half of NI farms were valued above the proposed £1m limit for agricultural and business property relief (APR/BPR).

ADVERTISEMENT

Last week, the UK government announced that the new APR/BPR limit, which is due to take effect from April 2026, will be increased to £2.5m.

Unused APR/BPR will also be transferable between spouses, including from those already deceased, so it gives £5m of inheritance tax relief to married couples.

Our analysis is based on DAERA’s assumption that an average figure of £21,000/acre covers the value of land, buildings, machinery and livestock on a typical NI farm.

It means that on average, farms which are smaller than 48ha in size are below the £2.5m limit and farms under 96ha are worth less than £5m.

Continued on page 4

The closest available data from DAERA shows that 76% of NI farms are under 50 hectares and 92% are smaller than 100 hectares in size.

However, these figures are based on total area farmed, so it includes land which is both owned and rented.

Valuations for inheritance tax are only based on owned assets and the latest DAERA figures show that 27% of land in NI is not owned by the person who farms it.

If rented land was omitted, then even more than 76% and 92% of farms are likely to fall below the £2.5m and £5m inheritance tax limits respectively.

Variations

Plenty of caveats apply, including the wide range in land values across NI, as well as variations in the value of buildings, machinery and livestock across local farms.

Also, inheritance tax bills are based on an individual person’s estate, so farms that are owned by several people will have several APR/BPR allowances.

However, our initial analysis does show how lifting the APR/BPR limit to £2.5m and making unused relief transferable between spouses has allowed the majority of NI farms to fall outside the scope of inheritance tax.

Even for those who are still impacted, the recent changes mean inheritance tax will be applied to a much smaller proportion of the person’s estate than was originally proposed.

It should be also noted that asides from APR/BPR, other inheritance tax allowances are available to NI farmers, including £325,000 per individual under the nil rate band.

A further £175,000 of relief can be available under the residence nil rate band, although this starts to taper away on estates worth more than £2m.