Farm Inheritance Tax: Who Really Loses - and Who Is Shaping the Row?

The intensity and longevity of the backlash against the farm inheritance tax (IHT) changes from parts of the farming world has been striking. I’m surprised it continues, but when you look closely at who stands to lose the most, the reasons for this become, I think a little clearer.

Until 1984, farmers paid inheritance tax in the same way as everyone else. That changed when agricultural land was removed from IHT, creating what has since become one of the most generous tax shelters in the UK. Whatever the original intention, this exemption has overwhelmingly benefited those with large amounts of land and capital, not small family farms.

Since then, land values have risen roughly fourfold. That wealth increase has accrued primarily to large landowners and estates, while farm incomes have lagged far behind. It was, however, a brave government that would revisit a relief that allowed multi-million-pound estates to pass between generations entirely tax-free.

Even after reform, farmers and large landowners continue to enjoy a privileged position in the tax system.

From 6 April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) will:

• Apply at 100% only to the first £1 million of qualifying assets per person
• Allow married couples to combine allowances, sheltering up to £2 million
• Apply at an effective rate of around 20% above that level (half the normal rate)
• Permit interest-free payment over 10 years

This is not a punitive regime. It remains generous by normal inheritance tax standards, particularly when compared with small businesses, family homes, or other forms of wealth.

Ministers argue the reform is aimed squarely at:

• Closing a loophole used by wealthy non-farming investors
• Preventing farmland being treated primarily as a tax shelter
• Raising revenue from the largest estates, not ordinary working farms

Government figures suggest:

• The majority of genuine family farms will still pay no inheritance tax
• A relatively small number of very large landowners account for most of the projected tax yield

Who Is Protesting - and Why That Matters

Much of the public anger has been channelled through organisations such as the National Farmers’ Union (NFU). But it is interesting to understand whose interests are most strongly represented.

The NFU and much of the rural media landscape are dominated by larger, wealthier landowners - those with the most to lose from any cap on reliefs. These are also the people best placed to:

• Fund lobbying efforts
• Shape national media coverage
• Frame the reform disingenuously as a threat to “family farming”

That narrative resonates emotionally, but it obscures a crucial fact: the biggest financial impact falls on large estates, not on small, upland farms or ‘family’ farms ( a fairly vague term open to different interpretations).

The Reality on the Ground: Different Farms, Very Different Outcomes (with research help from ChatGTP)

Lowland Family Farms

For most modest lowland farms:

• Combined spousal reliefs and nil-rate bands can shelter £2.6–£2.7 million
• Many will pay little or nothing
• Where tax arises, it is often manageable, payable over a decade or avoidable by other means

These farms are not the primary target of the reform. There will, however, be many who are valued higher than these figures and it is these farms that will need to take further measures to reduce their tax burden. They can potentially avoid inheritance tax entirely by gifting the farm to the next generation during the owner's lifetime, provided the owner survives for at least seven years after the gift.

Upland Welsh Sheep Farms

Upland farms typically:

• Operate on thin margins
• Have lower overall land values
• Fall within combined relief thresholds

While some may still face pressure due to rising land prices, many will remain untouched by the tax. These farms are often invoked in media arguments, yet they are among the least affected in practice.

Large Estates and High-Value Landowners

This is where the reform potentially bites hardest

Large estates:

• Easily exceed £5–10 million in value
• Quickly exhaust the £1–£2 million full relief allowance
• Face substantial tax bills even at the reduced 20% rate

These landowners:

• Benefited most from four decades of total exemption
• Now face the biggest adjustment
• Are also the most influential voices in the debate

Conclusion

The inheritance tax reforms do not primarily target “ordinary farmers.” They target concentrated land wealth that has enjoyed extraordinary tax advantages since 1984.

The political and media storm makes more sense when you recognise that those who lose the most also have the loudest voices and the greatest ability to frame the debate. They are, traditionally, not supports of Labour either.

That doesn’t mean there are no genuine concerns. But it does mean the public conversation has been shaped less by struggling upland farmers, and far more by large landowners facing the end of a uniquely generous tax break.

And of course, that doesn’t mean farmers are not facing incredible challenges on a daily basis. The food supply system is not tilted in their favour and they are at the front line of climate breakdown. A truly representative National Farmers Union would be headlining these two issues far more then its current noisy focus on the essentially minority issue of Inheritance Tax changes, a tax the rest of us have little choice, but to pay and that landowners will still only pay at half the rate of any one else.

Perhaps the thresholds should be higher? Perhaps the rate should be the same as it is for everyone else?

A couple of days after this blog was published the government raised the personal allowance to £2.5 million! i.e. £5millon for a couple. https://www.gov.uk/government/news/inheritance-tax-reliefs-threshold-to-rise-to-25m-for-farmers-and-businesses