Office of Budget Responsibility did not certify '500 farms' affected

The government’s claims about the impact of proposed Inheritance Tax (IHT) changes have come under fire, with critics once again arguing that the figures are vastly underestimated. Ministers have repeatedly asserted that their estimates are certified by the Office of Budget Responsibility (OBR), but the OBR has labelled the costings as “highly uncertain” and unlikely to stabilise for at least two decades.

Speaking at the Oxford Farming Conference, Jeremy Moody, secretary and adviser to the Central Association of Agricultural Valuers (CAAV), criticised the government’s reliance on these figures, highlighting discrepancies in the reported number of affected farmers and the potential long-term damage of the reforms. “The OBR has not given the Government the confidence it claims for the figures it uses,” said Mr Moody. “Instead, the OBR’s report repeatedly says that the financial figures are highly uncertain, and it does not even touch the question of how many taxpayers are affected.”

The government estimates that 500 farmers will be impacted by the IHT changes, a figure the Prime Minister described as “robust” in response to a question by EFRA Committee Chairman Alistair Carmichael. The Prime Minster replied: “That is a robust figure. It was published by the Treasury, certified by the OBR.” However, Moody refuted this claim, pointing out that the OBR’s Economic and Fiscal Outlook – October 2024 paper does not include this figure. Instead, the 500 figure originates from an HM Treasury document, focusing solely on those claiming relief under Agricultural Property Relief (APR) while overlooking those who rely on Business Property Relief (BPR).

“This is an HMRC figure, not an OBR one,” Moody stated. “HMRC may have answered the Treasury’s APR question but that does not give the full picture of who is affected by the tax changes, as it completely ignores those claiming BPR alone. Strictly, the official paperwork has never said that it did, whatever Ministers have then said. It fails to account for the full scope of farmers affected by the tax changes, ignoring those claiming BPR alone.”

The CAAV has conducted its own analysis, suggesting the government’s estimates underestimate the number of farmers affected by a factor of five. The organisation calculates that 75,000 farming taxpayers could face IHT liabilities over a generation, with inflation further widening the net. By the end of the first decade under the proposed policy, an additional 19%, around 14,500 more farming taxpayers, could be caught by IHT, driven by the erosion of relief thresholds. “Our calculations point to the first decade of the proposed policy ending with 89,500 farming taxpayers liable for inheritance tax (IHT) on their farm assets,” says Jeremy Moody. “The first 10 years alone would add some 14,500 (19%) to the CAAV’s assessment of 75,000 affected farming taxpayers over a generation - simply because of inflation, if there is no policy change. More would follow as each year goes by.”

Mr Moody continued: “The Government still clings to figures that the OBR has told it are “among the most uncertain in the policy package” when everybody else is telling them how much damage the proposals would do. The OBR report is not a defence; it is a certificate of uncertainty.”

The primary IHT relief for all taxpayers, the nil-rate band, has remained frozen at £325,000 since 2009 and is now extended to 2030, a total of 21 years without adjustment for inflation. The lack of inflation-proofing extends to the proposed £1 million cap for APR and BPR, which would fail to keep pace with rising land and asset values.

“When full APR and BPR were introduced in 1992, the nil-rate band protected 56 acres of typical farmland,” Moody explained. “Today, the same band, frozen since 2009, covers just 29 acres, leaving farmers increasingly vulnerable to tax liabilities on land that has grown in value while their relief has stagnated.”

The OBR has predicted the tax changes could raise £521 million by 2030 but flagged the assumptions as among the “most uncertain” in the policy package. Both static and behavioural factors, such as how farmers and landowners might adjust their operations to mitigate tax exposure, were highlighted as variables contributing to this uncertainty.

Moody urged policymakers to reconsider the proposals, warning of severe consequences for farming communities. “The current approach risks undermining the viability of family farms and agricultural businesses across the UK.”