Three-quarters of farms over 50ha hit by IHT, says the AHDB

More than three-quarters of farms in England and Scotland, spanning 50ha or more, will be impacted by the government’s proposed changes to farm inheritance tax (IHT), according to new analysis from the AHDB.

The findings indicate that 42,204 out of 54,938 farms – around 76.8% – will face new tax burdens once the reforms take effect in April 2026, restricting the full 100% agricultural IHT relief to the first £1m of combined agricultural and business property.

The AHDB’s independent study, using data from Defra, the Farm Business Survey, and the Scottish government, highlights that cereals and general cropping farms are most vulnerable due to their asset size, with single-person livestock farms also at high risk.

See also: 89,500 farmers to be hit by inheritance tax, says CAAV

AHDB analysts warn there is an urgent need for farmers to seek professional tax and succession planning advice to prepare for the coming changes.

The levy board says that, with only 300 working days until the new rules take effect, farmers must act swiftly to assess their financial position and plan accordingly.

Threat of land sales

AHDB’s economics and analysis director, David Eudall, cautioned that many farmers will need to sell land to cover their tax liabilities, particularly those in the cereal farming sector, where returns on assets are relatively low.

Mr Eudall added: “The debate, on whether the change to inheritance tax is the right decision, is not for AHDB to comment on. Our priority is to help explain how this will impact many levy payers and support them on navigating a path through these challenges.”  

This fresh analysis comes after farming organisations such as NFU, the Country Land and Business Association (CLA), and the Central Association of Agricultural Valuers (CAAV) raised concerns about the government’s plans, which could threaten the long-term sustainability of family farms.

Other analysis

The NFU has consistently argued that the IHT changes will harm family farms, potentially forcing them to sell land or even close down due to tax burdens.

Their own analysis suggests that up to 75% of commercial family farms could exceed the £1m threshold, making them susceptible to the new tax rules.

The CLA concurs, estimating that 70,000 UK farms – roughly a third of the total – could be affected by the reforms, urging further consultation before any implementation.

In marked contrast, chancellor Rachel Reeves has claimed that only up to 520 inherited agricultural estates a year will be affected by the reforms – a figure based on HMRC data on inheritance tax returns in 2021-22.

The fiscal watchdog, the Office for Budget Responsibility, has expressed doubts about the proposal’s effectiveness in achieving the government’s expected financial outcomes.

The NFU, CLA, CAAV and other farming organisations have received support from several major retailers urging the government to pause its plans to introduce the farm tax levy and carry out a full consultation with industry about the impact of these reforms on farm businesses.