Proposed inheritance tax changes to impact over 75% of farms in England and Scotland

New analysis by the Agriculture and Horticulture Development Board (AHDB) has revealed that the UK government’s proposed inheritance tax changes will affect more than 75% of farms in England and Scotland, reinforcing concerns previously raised by the National Farmers’ Union (NFU).

The AHDB study estimates that 42,204 of the 54,938 farms (76.8%) across the two nations with holdings of 50 hectares or more will be affected by the changes. This includes 33,286 farms in England (80%) and 8,918 farms in Scotland (67%).

The findings are based on average balance sheet data sourced from Defra, the Farm Business Survey, and the Scottish Government. They highlight that farms engaged in cereals and general cropping are the most at risk, with livestock producers and mixed farming operations also significantly affected.

The NFU has long warned that proposed changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) could devastate family farms. The union argues that many farms lack the income to cover potential inheritance tax bills without selling land or assets, jeopardising the viability of businesses passed down through generations.

Responding to the AHDB’s findings, NFU President Tom Bradshaw said: “The fact that the government’s own levy board has come to the same conclusion as the NFU - that 75% of commercial farm businesses could be affected - speaks volumes. It is abundantly clear that the Treasury has drastically underestimated the impact of this policy on British farming and food security.”

The NFU has launched the Stop the Family Farm Tax campaign, highlighting the risks to farms and food security while pushing for a meeting with the Chancellor to address the issue.

The AHDB findings follow a week of key developments in the NFU campaign:

• The Office for Budget Responsibility (OBR) flagged potential challenges for elderly farmers due to the proposed changes.

• Efra Committee Chair Alistair Carmichael questioned the accuracy of the government’s data in a letter to the Prime Minister.

• All major UK retailers voiced their support, citing concerns over the policy’s impact on food security.

• Over 27,000 people signed the NFU’s petition, which was delivered to Downing Street on January 26.

Analysis by the NFU, conducted with Treasury and OBR economists, suggests that 75% of commercial family farms will exceed the proposed £1 million inheritance tax threshold. In contrast, the government had previously estimated only 27% of farms would be affected.

The anticipated tax burden could erase profits for an average cereals farm and cut returns for dairy farms by nearly half.

AHDB analyst Tom Spencer said that cereals and general cropping farms face the highest risk, as do livestock farms under single-person ownership.

With the tax changes set to take effect on April 1, 2026, AHDB Economics and Analysis Director David Eudall stressed urgency for farm businesses to act: “There are 300 working days left until these changes are implemented. This means 140 farming businesses per day across England and Scotland need to prepare for their tax implications. Succession planning is now more critical than ever.”

Farmers are encouraged to seek expert tax and business planning advice to navigate the impending challenges.

Key Findings of AHDB’s Analysis

• Farms below 20 hectares were excluded as they are unlikely to be commercial enterprises.

• Farms between 20 and 50 hectares are assumed to have assets below the £1.325 million threshold and are considered safe.

• Farms above 100 hectares are projected to exceed £2.65 million in assets, placing them at high risk of being affected.

An average farmhouse in England is valued at £459,400, adding to the total taxable assets.

The NFU continues to urge the government to reconsider the proposed changes, calling for a collaborative approach to ensure family farms can thrive. As Tom Bradshaw concluded:
“We want to sit down with the Chancellor and find a way forward. Will she also ignore the independent farming experts on her own levy board?”

For more information on the Stop the Family Farm Tax campaign, visit the NFU’s website.