Government reviews inheritance tax reforms for farmers

Recent reports reveal that the UK government is re-evaluating its proposed Inheritance Tax (IHT) reforms, particularly in light of significant backlash from farming families. As the Autumn Budget approaches, the potential for changes to the initial proposal— a 20% tax on estates valued over £1 million— is being keenly anticipated. Farming communities have raised alarms about the severe implications these reforms could herald for family-run farms across the country.

Current discussions suggest a possible adjustment of the IHT threshold from £1 million to £5 million, or £10 million for married couples. Such a revision could indeed provide crucial relief to many agricultural enterprises facing existential threats due to the originally proposed tax structure. Expert lawyer Esther Woolford, partner and agriculture sector lead at Clarke Willmott LLP, expressed cautious optimism regarding these rumoured changes.

Esther stated, “Our Agricultural Team would welcome the reported reconsideration of the government’s proposed changes to inheritance tax (IHT) affecting farm owners. However, we must temper what we say below with a strong note of caution that the reported rumours may flow more from wishful thinking than real substance.” She highlighted that the anticipated Autumn Budget announcement originally aimed to cap Agricultural Property Relief (APR) and Business Property Relief (BPR) at £1 million raised significant alarm within farming circles.

Many professionals within the sector have shared concerns that these reforms could undermine the sustainability of family farms and compromise national food security. Esther remarked, “We, amongst many, questioned the government’s methodology to its claimed goal of reducing the attractiveness of farmland as a tax haven but instead devising a scheme that will impact a significant number of family farming businesses and our country's food security.”

Given the uncertain climate, Esther advised that farming businesses should not assume changes are imminent or certain. “It is unlikely that the agricultural sector will return to a time of 100% IHT relief and therefore planning is the only way to ensure long-term viability of the family farm,” she said. Farmers are encouraged to engage actively with professional advisors to navigate multiple scenarios and prepare for various potential outcomes.

Succession planning is another vital element highlighted by Esther. Engaging the next generation in the family farm can foster a sense of responsibility and encourage forward-thinking. However, she emphasised that succession isn’t merely a singular milestone. Continuous planning is crucial for resilience against emerging challenges and tax burdens.

Esther concluded her remarks by urging reform that is holistically beneficial: “We of course urge the government to ensure that any reform is not only fiscally sound but also socially and economically fair. Farming is not just a business, it’s a way of life and the proposed changes must start to reflect that. Afterall, and as the government keeps telling us “food security is national security.”

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