Farmers fear not for inheritance tax

The Government announced on 23 December that proposals to tax farmland inherited on death have been watered down. The UK Budget 2024 declared that inheritance tax (IHT) would apply to agricultural assets worth over £1 million reversing the 100% IHT relief on agricultural assets that has been in place for 45 years. The relief was due to end in April 2026. 

It has now been decided that the threshold for IHT on agricultural assets will now be £2.5 million rather than the £1 million as originally planned. This follows 14 months of protests from farmers, the National Farmers’ Union and even a legal challenge for judicial review. 

The Government estimates that 900 fewer estates in the UK will be affected by the changes, dropping from 2,000 to 1,100. Note that farmers may still pass assets to spouses free of tax and the revised proposals mean £5 million in qualifying assets could be passed between a couple. 

Despite the revision to the proposals, concerns still exist around the proposals that the changes only limit damage and do not eradicate it altogether and some family farms will still be hit by a large tax bill. In particular, those farms that have high value agricultural assets but are operating at a low profit margin and may feel the pinch when it comes to meeting any IHT liability. 

If you have any questions around IHT and its impact for farmers after reading this article please get in touch with us.

Government proposals to tax inherited farmland have been watered down, with the planned threshold increasing from £1m to £2.5m.

https://www.bbc.co.uk/news/articles/c8e9n3y28g1o