The changes to Inheritance Tax are expected to affect over 75% of farms in England and Scotland of 50ha or more in size, according to the new independent analysis from the Agriculture and Horticulture Development Board (AHDB).
It has calculated that 42,204 out of 54,938 farms (76.8%) across the two nations will be impacted by the new tax rules. Starting from April 2026, the full 100% relief from inheritance Tax is limited to the first £1 million of combined agricultural and business property.
More than half of the farms affected are involved in cereals or general cropping as their main enterprise, with the rest being livestock producers or mixed farming operations, according to Defra, the Farm Business Survey and the Scottish Government.
Tom Spencer, AHDB analyst states that their calculations show ‘cereals and general cropping farms are the most likely to be affected due to their scale and asset size. For livestock farms, it is those businesses with single-person ownership that are most at risk.”
It has been advised that due to the low rate of return on net current assets in farming, the most cost-effective way a cereals producer could pay their tax burden would be to sell land.
David Eudall, the economics and analysis director at AHDB has added that AHDB’s priority is to “help explain how this will impact many levy payers and support them on navigating a path through these challenges”.
He goes on to explain: “There are 300 working days until 1 April 2026, when the tax changes come into effect. This means 140 farming businesses across England and Scotland per working day, from today (28 January 2025) onwards, will need to ensure their business is set up to manage their tax implications.“
Finally, the AHDB believes it is “critical for any affected farming enterprise to seek out expert tax and business planning advice. Succession planning was already important in agricultural farming businesses, now it is essential.”
