The future of farmland inheritance in the UK hangs in the balance as a new report from the Institute for Fiscal Studies (IFS) proposes delaying controversial tax changes. The independent think tank suggests implementing an inheritance tax holiday for the next several years to avoid unfairly penalizing elderly farmers who may not have had sufficient time to plan for the impact of the new rules.
Farmers Protest Inheritance Tax Changes
Last month, Chancellor Rachel Reeves announced in her budget that farmers with businesses worth over £1 million could face a 20% inheritance tax, a stark change from the previous agricultural property relief that exempted farmers from the levy. The news sparked outrage within the farming community, culminating in a tractor protest outside Parliament.
Many farmers argue that while they may be asset-rich, with valuable land holdings, they are often cash-poor due to plummeting farm incomes caused by cost inflation, poor harvests, and fierce competition among retailers. Some claim their take-home pay is less than minimum wage, making the prospect of a hefty inheritance tax bill particularly daunting.
IFS Proposes Inheritance Tax Holiday
In light of these concerns, the IFS has suggested that the government consider an inheritance tax holiday for farms passing to the next generation in the coming years. Senior research economist David Sturrock explained:
“Current farm owners passing away in the next seven years (but after the new regime comes into force in April 2026) will not have had the opportunity to avoid inheritance tax by making lifetime gifts.”
Sturrock proposed that the government could make lifetime gifts of agricultural property made before a certain future date inheritance tax-free, regardless of when the death occurs. This would give current farm owners the same opportunity to plan for and potentially avoid the tax as owners of other assets.
Treasury Considers Mitigations
Amid the growing backlash, Treasury officials are reportedly assessing potential mitigations to the policy, including:
- Amending gifting rules for farmers over 80 to allow them to pass on their farm to family without having to live for seven years after the gift
- Equalizing the inheritance tax to 40% but making it payable only when the land is sold to avoid impacting those who want to keep the farm in the family
- Implementing a clawback of all inheritance tax relief if farmland is sold within a certain time after inheritance
- Raising the inheritance tax cap to around £20 million so only the largest farm businesses are affected
Balancing Fairness and Food Security
The inheritance tax debate strikes at the heart of a delicate balance between treating all assets fairly and ensuring the viability and continuity of the nation’s farms. The government has stated it targeted the policy change at wealthy investors buying agricultural land to avoid inheritance taxes, a practice blamed for driving up land prices and making it harder for working farmers to acquire or maintain holdings.
However, critics argue the current approach risks jeopardizing food security by burdening family farms with unsustainable tax bills, potentially forcing the sale of agricultural land for non-farming purposes. As one protester’s sign read during the tractor demonstration: “No Farms, No Food.”
“The government hid behind the IFS to try and justify this disastrous policy. That very same organization is now telling them that their own proposals need an overhaul.”
– Tim Farron, Liberal Democrat environment spokesperson
As the Treasury evaluates potential changes and the IFS report circulates Westminster, all eyes are on Downing Street to see if the government will change course on the contentious tax policy. For now, the fields of Britain’s family farms are blanketed with an uneasy uncertainty, as a centuries-old way of life hangs in the balance.
