Farming families across the UK are being urged to seek expert advice after changes to Inheritance Tax (IHT) in the Government’s recent Budget, which many have labelled a “disastrous” move for the agricultural industry.
In a bid to overhaul Inheritance Tax reliefs, Chancellor Rachel Reeves announced significant cuts, set to take effect from April 2026. Under the new rules, the IHT will be levied at an effective rate of 20 per cent on the value of business and agricultural assets worth over £1 million. This includes assets such as livestock, machinery, farmhouses, and sheds, all of which will now be subject to taxation under a reformed Agricultural Property Relief (APR).
The proposal has sparked widespread concern among farmers, with many fearing it could result in family farms being sold off to cover tax liabilities, thus threatening the transfer of farming operations to the next generation. Industry experts have warned that this change could undermine national food security and destroy long-established farming businesses.
Alex Phillips, a partner at mfg Solicitors and head of the Agriculture and Rural Affairs Division, stressed the importance of farming families seeking professional guidance on succession planning. Phillips said, “Farmers are feeling particularly let down following the Chancellor’s Budget. The mood is one of despair, with many fearing they will have to sell large parts of their farms to pay tax. This could ultimately lead to the loss of farms that have been passed down through generations.”
The anger over the reforms has been compounded by a perceived betrayal of pre-election promises made by the Labour Government. In 2023, Prime Minister Sir Keir Starmer, then leader of the Opposition, assured farmers that their concerns about IHT would be addressed and that the Government understood the risks to British farming. However, recent changes to tax policy have left many feeling misled.
Victoria Vyvyan, President of the Country Land and Business Association (CLA), labelled the decision as “nothing short of a betrayal.” Vyvyan’s comments come after the Labour party had repeatedly assured farming communities that IHT reliefs would not be altered under a Labour Government.
According to experts, the new tax policies will impact a much larger number of farms than the Chancellor’s claim of just 6 per cent of estates. Agricultural professionals have warned that the reforms could affect almost all but the smallest of farms, particularly at a time when the industry is already struggling to maintain its financial sustainability.
With the changes to Agricultural Property Relief, many farming families are being urged to review their succession planning and seek comprehensive legal and financial advice. Sally Smith, a partner and head of the Tax and Estate Planning Team at mfg Solicitors, emphasised the need for farmers to assess their wills and partnership agreements in light of the new tax regulations. She added that farmers should also consider lifetime gifting as part of their succession planning strategy to protect their family farms.
Smith concluded, “It is crucial that farming families seek professional advice from their legal and financial advisers, working together to ensure the future sustainability of their businesses and the preservation of agricultural land.”
As these significant tax changes loom, farming families are being urged to act now to secure their futures and the legacy of their farms.