Farming Inheritance Tax Changes

Our Rural Services Department regularly provides valuations for Farm Inheritance tax cases and assists in the claiming of Agricultural Property Relief (APR) and Business Property Relief (BPR). These valuable reliefs have survived both Labour and Conservative Governments for many years. 

In our experience, most working farms sit on a valuable asset, many of which are passed from generation to generation and so the capital value is never realised. Meanwhile farming margins are nearly always tight and such business often make surprisingly small profits, thus generating very low yields, usually well below 1% of the capital value. Much media commentary this week has talked of yields being at just ½ a percent. The profits the average farm generates simply will not cover the tax burden that many working farms will potentially endure. In fact, it might take all of the profits for several decades to do so. In reality for most, this will mean a sale of land.

The true scale of the impact is hotly debated with widely different figures, even the Treasury and DEFRA cannot agree. The Treasury’s figures are largely based on APR claims but that excludes the number of BPR claims which is often the more valuable relief to working farmers. The Head of White & Sons Rural Services, Stuart Walker MRICS FAAV, said that “in the last 12 months we have carried out 10 large farm probate valuations with an average value of £4.615M, 2023 was similar. In the last 2 years we have valued 5 farms for probate that were close, or just above £10M. These would be disproportionately affected by these rules. None of these were big estates, but were all family run businesses of multiple generations. Although the tax only bites on death, the fact is that the threat of it may cast a long shadow with significant impact long before a family death occurs”. 

Stuart went on to say that “anecdotally we have heard of farms sales falling through in the last three weeks and people withdrawing from decisions to construct new farm buildings or make other on-farm investment in infrastructure. Historically farmers have tended to reinvest any profits in the business.  Improved efficiencies tend to come along with increased scale which is why those farm businesses that have survived and thrived have increased in size.  Now already some are thinking twice of reinvesting and instead worrying about needing to save up for future IHT bills. This is really bad for farming investment and therefore bad for food production”. 

We continue to monitor the situation and have dealt with a number of enquiries from clients looking to revisit their wills and tax planning, including making lifetime transfers. If you require assistance with understanding what impact the new IHT rules will have, or you require a professional valuation to assist you with a transfer of assets or indeed for probate, please contact Partner Stuart Walker or one of the rural team on 01883 723 680 or [email protected].