How the Recent Budget Impacts Farmers – And Why They’re Angry
On a rainy November day in Westminster, over 10,000 farmers gathered to voice their anger over the government’s proposed inheritance tax (IHT) changes. Set to take effect in 2026, these changes mark a significant shift for the agricultural community, who have long relied on exemptions that recognized the unique challenges of farming. Here’s a breakdown of what’s happening, why farmers are upset, and how the changes to Agricultural Property Relief (APR) will affect them.
What Are the Current Rules for APR and IHT?
Currently, farmers benefit from Agricultural Property Relief (APR) and Business Property Relief (BPR), which reduce the tax burden (by either 50% or even 100%) when farms or agricultural businesses are passed down to heirs. These reliefs can significantly lower or eliminate inheritance tax on farmland, livestock, and other qualifying assets.
Combined with the nil rate band (£325,000 per individual) and the residence nil rate band (up to £175,000 for a family home), many farmers have been able to transfer their farms to the next generation without paying inheritance tax. This system has been in place since 1992 and has supported farming families in maintaining their land and livelihoods.
What Are the Proposed Changes?
Under the proposed 2026 rules:
- Capped APR and BPR: Relief will now be capped at £1 million.
- New IHT Rate: Any value above the £1 million threshold will be taxed at 20%, which is lower than the standard IHT rate of 40%. However, it still represents a new financial burden for many farmers.
- Impact on Larger Farms: While smaller farms may fall below the threshold, larger family farms, which often have high land values but low income, will face steep inheritance taxes.
The government argues that these changes will primarily affect the wealthiest estates, but the realities for farming families tell a different story.
Why Are Farmers Upset?
Asset-Rich, Cash-Poor
Many farmers argue that while their land may be worth millions, their income is minimal. For families like his, paying the new IHT bills would likely mean selling parts of their farm—jeopardising their way of life and generational heritage. It could change the face of farming in UK with only large corporations able to afford to farm, putting generational farming at risk.
Low Returns and Limited Liquidity
Farming is a low-profit business. With a return on assets often as low as 0.5%, farmers argue that securing loans to cover IHT would be almost impossible. The worry is that wealthy corporations or private investors will buy up farmland, further consolidating ownership and altering the rural landscape.
Short Timeframe for Adjustment
Farmers argue that the two-year timeline to implement the new rules is unrealistic. Some are asking – if the IHT changes are inevitable – for at least seven years to adapt succession plans and ensure that families can prepare for the financial impact.
Loss of EU Subsidies
For some farmers, the changes are compounded by the loss of EU subsidies following Brexit, and the changes to IHT are seen as a further failure to support the farming sector in this country.
What Are Farmers Demanding?
The farmers at Westminster had a clear message for the government:
- Target Wealthy Landowners, Not Small Farmers
Many believe the policy is misdirected, penalising working farmers while sparing wealthier aristocrats and large corporations who were the more appropriate targets for taxation. - Extend the Timeline
Farmers need more time to adjust to these changes. A longer grace period could allow families to restructure finances or develop alternative succession plans. - Rethink the Policy
Farmers argue that taxing farmland based solely on its value ignores the economic realities of agriculture. They propose maintaining existing reliefs or introducing exemptions for working farms.
The Road Ahead
While the government claims only 500 of the wealthiest estates will be affected annually, farmers argue that the impact on those affected will be catastrophic. Many left Westminster hoping for a policy reversal but bracing for the worst.
The changes threaten not just livelihoods but the heritage and identity of farming families across the UK. As one protester succinctly put it, “The government needs to understand: land value is irrelevant if you don’t have the cash to pay the bill.” Whether these pleas will spark a U-turn remains to be seen.
Arken can help you draft Business Property Relief Trusts and the Wills required to support your farmer clients. Reach out to us today to find out more.