Institute for Fiscal Studies on inheritance tax changes

From April 2026, inherited agricultural assets worth more than £1m, which were previously exempt, will have to pay inheritance tax at 20 per cent. The move has been met with fury in the farming community, with protest signs across the country warning “No farmers, no food, no future”.

In Northumberland, angry farmers picketed the Northern Farming Conference earlier this month in protest against the changes. Two Conservative county councillors representing rural wards also travelled down to London to join thousands of farmers on a protest march.

However, the Government has insisted the changes will make the rules fairer, and argued only a small number of farms will be impacted by the change – although the exact figure remains uncertain.

An analysis by the economic research group the Institute for Fiscal Studies (IFS) concluded that the reforms would “reduce the inheritance tax advantages” afforded to owners of farmland – but these assets would still be “much more lightly taxed” than others.

The IFS say the number of farms affected is “uncertain” but suggest it will be “significantly less” than 500 estates per year, adding “relatively simple” planning will mean many farms will not be liable for any tax.

The analysis continues that the reforms move inheritance tax in the “right direction”, and that it was “not obvious” that were were good reasons not to treat farmland similar to other assets for the purpose of inheritance tax.

Under the changes, the full 100 per cent relief from inheritance tax currently applied will be restricted to the first £1 million of combined agricultural and business property. Above this amount, landowners will access 50 per cent relief from inheritance tax and will pay inheritance tax at rate of 20 per cent, rather than the standard 40 per cent.

The Government will allow the tax to be paid in instalments over 10 years interest-free, rather than immediately, as with other types of inheritance tax.