The UK government’s latest Inheritance Tax overhaul has farmers in an uproar, sparking protests in London as they rally near Parliament to vent their outrage. The cause of the furore is a law set to take effect in April 2026: agricultural estates valued above £1 million, which was shielded from the taxman, will now face a 20% Inheritance Tax — less than the standard 40%, but enough to sow discontent among farmers.
The true scale of the impact on farms remains contested, though, as estimates vary wildly from a low of 500 farms to a high of 70,000. Unsurprisingly, government figures lean toward the lower end of that spectrum while farmers and farmer associations prefer the higher figures.
Where Does the 70,000 Figure Come From?
The debate over Inheritance Tax on farms has turned into a war of numbers. The Country Land and Business Association (CLA) warns capping agricultural property relief at £1 million could jeopardise 70,000 farms.
Yet the figure of 70,000 seems slightly exaggerated. It is an estimate of all UK farms valued above £1 million, not the number of estates to be charged the Inheritance Tax each year.
More grounded estimates suggest that 30% to 35% of the UK’s 209,000 farm holdings would be affected by the tax. This puts the number of farms affected at 62,700 to 73,150.
Moreover, Inheritance Tax is only charged when the farm passes from one generation to another, meaning the number actually affected in any given year will likely be far smaller.
Where Does the 500 Figure Come From?
The Treasury insists the uproar over Farm Inheritance Tax changes is overblown and argues only 500 estates will be hit each year. HMRC data backs that claim: 462 inherited farms were valued above £1 million in the Tax Year 2021/22. Under the new rules, those estates would face a 20% tax but only on the value above £1 million.
Further still, with an Inheritance Tax-free allowance of £325,000 and an additional £175,000 for a primary residence, a single farmer can pass on £1.5 million without tax. For married couples, that doubles to £3 million. Even among high-value estates, HMRC recorded just 117 farms worth more than £2.5 million in 2021/22.
How Much Could the Inheritance Tax Change Raise?
The Treasury defends this current move changing the Inheritance Tax provisions for farms. They present the data that the changes will save £230 million in Tax Year 2026/27. This number is projected to reach £520 million by 2029/30. But the Office for Budget Responsibility (OBR) notes that these figures are shrouded in uncertainty.
Moreover, critics argue that this claim ignores the precarious economics of farming. Although farms appear valuable on paper, their wealth is largely illusory unless sold. For farmers passing their land to the next generation, that so-called wealth remains locked in soil and machinery.
Consider the numbers. Government data pegs the average farm profit at £45,300 a year, which is hardly a windfall and possibly overstated since struggling farms were excluded from the survey. What’s more, the average return on capital — a meagre 0.5% — makes agriculture look more like a subsistence operation than a burgeoning business.
The government counters with a carrot: inheritors of farmland get a decade to pay their tax bill interest-free, unlike other estates that face immediate payment. But detractors see this as little more than window dressing, failing to address the core problem: taxing illiquid assets risks starving the very industry tasked with feeding the nation.
As tax breaks tighten, one wonders if the countryside’s real battle isn’t inheritance reform but its slow transformation into a playground for the wealthy. Even so, critics say in its rush to balance the books, Westminster may be sowing the seeds of rural decline.
Balancing the needs of public services with the survival of family farms is not easy and a solution that does not crush agriculture is needed.
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