Labour’s budget has been criticised for the effect it could have on British farmers.
Chancellor Rachel Reeves, announced last week that from April 2026 farms and other business property will fall within inheritance tax.
Inheritors will have to pay 20 percent of the value of the agricultural and business property above £1million. Having tax exemptions currently costs “about £1bn a year for taxpayers”, according to Chief Secretary to the Treasury, Darren Jones.
This prompted fury in farming communities, with the National Farmers’ Union saying Labour broke a promise not to tamper with agricultural property relief (APR).
The chief executive of the Tenant Farmers’ Association, George Dunn, argued that his members could be affected indirectly if larger estates sold up to pay inheritance tax bills.
Sam Kirkham, who specialises in agriculture at Albert Goodman Accountants, said: “People look at the value of farms and think the farmers must be wealthy”.
She added that when the farm passes to the next generation, they never get to realise that capital and farm profits are insufficient to meet the additional cost of inheritance tax.
Tax experts, however, have questioned whether the “family farm” will be affected.
The Treasury estimates that 500 farms will be affected by the agricultural property relief reform a year. There were a total of 462 inherited farms valued above £1m in 2021-22, according to HM Revenue and Customs.
The Centre for the Analysis of Taxation found that only 200 estates claimed more than £1m in relief between 2018 and 2020. Those 200 estates received 64 percent of all the government agricultural relief.
Arun Advani, associate professor of economics at the University of Warwick, said only 44 percent of those who gained agricultural relief received any trading income from agriculture at any point in the five years prior to death.
It is “not the classic working farmers” who will bear the brunt of the changes, he said, and the change could help the rural property market because fewer people will buy a field as inheritance tax dodges.
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