The possible introduction of sweeping changes to inheritance tax across the UK, would amount to a “farm family tax”, the National Farmers Union (NFU) has said.

The NFU said its members were “increasingly concerned” about media reports that reform of agricultural property relief (APR) is being considered for next week’s Autumn Budget. APR allows most farm businesses to be exempt from inheritance tax when the farm owner dies and the property is passed on to the next generation.

“Farming is often a generational business and APR is what makes it possible for small family farms to pass from one generation to another,” said NFU president Tom Bradshaw.

The biggest concern among the UK farm lobby is that APR is scrapped completely in a bid by the new Labour government to raise more tax revenue.

Taxation is not a devolved matter in the UK, so any changes made in London would affect all parts of the UK, including NI.

The standard rate of inheritance tax is 40% above a tax-free threshold of £325,000.

It means on a typical 100-acre farm in NI valued at £1.5m, a full inheritance tax bill in the absence of APR could equate to £470,000.

2019 report

According to some media reports, UK Chancellor Rachel Reeves could be looking to draw on proposals which were put forward in a review of inheritance tax back in 2019.

The report was compiled by the now-defunct Office of Tax Simplification (OTS) and many of its recommendations were not followed up by the UK government at the time.

Interestingly, the OTS report is clear that APR should not be scrapped, describing the tax relief as having an “important role” for passing farms from generation to generation.

“The main policy rationale for APR and BPR (business property relief) is to remove the need for the sale or break up of businesses or farms to finance inheritance tax payments,” the report states.

One of the main points from the OTS report in 2019 that could affect farm inheritance is the recommendation to scrap the “capital gains uplift” for calculating capital gains tax bills.

This would mainly impact landowners who sell off farmland that they inherited when the previous owner died.

UFU letter

The case for retaining APR was reiterated in a letter from the Ulster Farmers’ Union (UFU) to Prime Minister Sir Keir Starmer.

“APR is a lifeline for family farms. Any changes to it would be tantamount to introducing a tax on family farms,” said UFU president William Irvine.

The union also pressed for increased, multi-year funding for agricultural support in next week’s Autumn Budget.

“Our farmers need certainty to continue producing high-quality food while contributing to the environmental targets,” Irvine said.