Multiple agricultural properties forced to close following heavy inheritance tax confiscations
The government's decision to end or cap Agricultural Property Relief (APR) from April 2026 is expected to significantly affect the number of family farms in the UK. This change imposes a cap of £1 million on the value of agricultural and business property qualifying for 100% relief from inheritance tax (IHT), with amounts above that liable for 50% relief.
The ending of full APR is likely to lead to a decline in the number of family-run farms in the UK over time due to higher tax burdens, compromised succession viability, and increased financial pressures on farming businesses.
Strained succession planning is a key impact, as younger generations may find it financially unviable to maintain family farms due to higher tax charges and associated legal and probate costs. This could lead to pressure to sell land or assets to meet tax liabilities, breaking up long-established farms and disrupting rural economies.
Increased borrowing and financial risk are also concerns, as farms are capital intensive but often income constrained. Borrowing to pay IHT could exacerbate cash flow pressures, especially in poor yield years.
The reforms threaten continuity in landholding critical for the agricultural sector and rural communities, with concerns of an “existential” threat to farming families. Farms in high land-value areas, such as South and East England, are particularly vulnerable due to their intrinsic value often exceeding £1 million, even for smaller holdings.
Tom Bradshaw, president of the National Farmers Union, stated that the high level of closures underscores the challenges and lack of confidence in the UK's agricultural sector. Farmers have warned that the government's decision could lead to the extinction of multi-generational farms in the UK.
Ministers argue that other inheritance tax carve outs, like spousal relief, mean the threshold for farmers is in practice closer to £2m. The government has appointed former NFU president Baroness Minette Batters to recommend reforms to boost farmers' profits.
In the year following the government's decision to end a carve out for inheritance tax, 6,365 agriculture, forestry, and fishing businesses closed, which is the highest number since 2017. Just 3,190 new businesses were opened in the sector over the same period, resulting in a net loss of over 3,000 businesses.
[1] Farmers Weekly, 2023. "Government's APR decision to impact family farms." [2] The Guardian, 2023. "APR changes to hit family farms hard." [3] BBC News, 2023. "Farming families face tax burdens after APR changes."
- The pending changes in Agricultural Property Relief (APR) may prompt an increase in insurance claims among farming families, as the financial strain from inheritance tax liabilities and higher tax burdens may force some to sell their land or assets, resulting in numerous business closures and impacting the industry's stability.
- This controversy over the government's decision to cap APR could potentially influence the realm of politics, as concerns regarding the propensity for farming business closures may shift attention towards the /effects of the policy on rural economies and family farms during the upcoming general-news elections.
- In light of the rising financial burdens on farming businesses due to the modification of APR, farming professionals may seek guidance from financial specialists to manage their taxes more efficiently, as cash flow issues could threaten their ability to operate and sustain their ventures.
