Farmers with assets over £1mn hit by inheritance tax reforms

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Farmers with assets worth more than £1mn will have to start paying death duties for the first time in decades after the UK government cracked down on inheritance tax loopholes in its Budget.

Chancellor Rachel Reeves said on Wednesday that from April 2026 the first £1mn of combined business and agricultural assets would still benefit from IHT relief, but that relief would fall by 50 per cent for assets with a value over that cap.

Agricultural property relief (APR) and business property relief (BPR) were designed to ensure the survival of family and farm businesses after the owner’s death. According to tax experts, the policies overwhelmingly benefit the country’s largest estates.

The chancellor said on Wednesday that the measures were designed to protect “family farms” but farmers have countered that the £1mn cap will still hammer agricultural businesses that are asset-rich but cash-poor. 

Tom Bradshaw, president of the National Farmers Union, said the cap was far too low, pointing out that the average farm in England was 88 hectares, which would currently be valued at well over £1mn.

“Just because a farm is a valuable asset doesn’t mean those who work it are wealthy,” he said, adding that hitting APR would make produce more expensive and threaten food security, as farm incomes were already being hammered by a reduction in subsidies and the volatile climate.

The Country Land and Business Association in England and Wales, which represents landowners and rural businesses, said capping agricultural property relief at £1mn could harm 70,000 farms.

“Many farmers, operating on slim margins, will now face having to sell land to pay inheritance taxes. At a time of profound change in the industry, adjusting to new agricultural policies, the government is offering no vision for a positive economic future for us,” said CLA president Victoria Vyvyan. 

Reeves also announced that from 2027 the government would bring inherited pensions into inheritance tax. Together the reforms would raise £2bn by the final year of her five-year forecast.

Critics of APR have argued that wealthy people have snapped up estates that own farmland in order to dodge death duties.

A recent analysis by the Centre for the Analysis of Taxation (CenTax) found that more than two-thirds of APR went to around 200 UK estates a year, with each claiming more than £1mn in relief.

The number of properties acquired by actual farmers has been in steady decline. Private investors, lifestyle buyers and institutional investors bought half the farms available in 2023 and more than twice as much land as farmers, according to land agents Strutt & Parker.

Forty per cent of buyers were farmers in 2023, compared to 60 per cent in 2014.