Don't change inheritance tax relief for working farms

We think that changing inheritance tax relief for agricultural land will devastate farms nationwide, forcing families to sell land and assets just to stay on their property. We urge the government to keep the current exemptions for working farms.

We feel that passing farms through generations is essential to UK farming. Until now, inheritance tax exemptions have made this possible by allowing farmland to pass without taxation. We think that changes to inheritance tax will harm UK farming deeply, with some farmers predicting their families will be forced out within two generations.

We think the government is framing the policy around the targeting of rich landowners, but we believe this policy will affect farming families of all sizes.

At Autumn Budget 2024, the Government took a number of difficult but necessary decisions on tax, welfare, and spending to restore economic stability, fix the public finances, and support public services. These were tough decisions given the situation inherited by the Government, but it has done so in a way that makes the tax system fairer and more sustainable.

Inheritance tax is paid on the estate (the property, money, and possessions) of someone who has died. The most recent four years’ worth of data show that amongst agricultural property relief claims, including those that also claimed business property relief, 47 per cent of the total Exchequer cost of the relief went to the top seven per cent of claims. It is not fair to maintain such a significant relief for a very small number of claimants, when this money could better be used to fund our public services.

That is why from 6 April 2026, the full 100 per cent relief from inheritance tax will be restricted to the first £1 million of combined agricultural and business property. Above this amount, there will be 50 per cent relief so inheritance tax will be paid at a reduced effective rate up to 20 per cent, rather than the standard 40 per cent. The new system remains more generous than it has been in the past: the rate of relief prior to 1992 was a maximum of 50 per cent on all agricultural and business assets, including the first £1 million.

This is on top of the other exemptions and nil-rate bands that people can access for inheritance tax too. This means that a couple with farmland, depending on their circumstances, can typically pass on up to £3 million to their descendants without paying any inheritance tax.