Exeter law graduate Harry Cooke has analyzed the recent budget changes to agricultural property relief that have sparked nationwide protests. The Labour government’s budget announcement will significantly alter inheritance tax (IHT) relief on agricultural property.
Modern inheritance tax has its roots in 1894 with the introduction of Estate Duty, a tax on wealth transferred after death. Agricultural property relief (APR), which exempts such property from IHT, was first introduced in 1992 under John Major’s Conservative government to facilitate the intergenerational transfer of family farms without a heavy financial burden.
Under the current system, land and pastures used for agricultural purposes enjoy 100% relief from IHT, enabling the tax-free transfer of estates. However, the Labour government’s 30 October 2024 budget has capped full relief at £1 million, with a reduced 50% relief for values above this threshold. The government anticipates this reform will generate £1.765 billion in revenue between 2026 and 2030, but the farming community fears it could be disastrous for an industry already facing financial challenges.
Why is inheritance tax relief crucial for farmers? The government estimates that the reforms will only affect the wealthiest 500 estates annually, with smaller farms remaining unaffected. This implies that nearly three-quarters of estates claiming APR, including those also claiming business property relief, would not be impacted by the changes. However, farming families argue that the existing relief is essential for the survival of generational farms.
The agricultural sector is often characterized as ‘asset-rich but cash-poor,’ meaning that while farmers may own valuable land, machinery, and livestock, their income is often modest. Without the current 100% IHT relief, farmers warn that passing land to the next generation could become financially unfeasible, potentially leading to the sale of many farms.
The Agricultural and Horticultural Development Board (AHDB) predicts that over 75% of farms larger than 124 acres in England and Scotland will be affected by the changes. Farmers also highlight that with the UK producing 60% of its own food, weakening the agricultural sector could have long-term implications for national food security.
While the government allows IHT payments to be spread over 10 years and suggests that married individuals could utilize up to £3 million in relief, many in the industry argue that this merely extends the financial burden rather than alleviating it. Farms that do not yield a sustainable return will be negatively impacted if they exceed the threshold.
Protests are escalating as farmers fight back against recent agricultural reforms. Nationwide protests have seen farmers driving tractors through major cities, including London. The National Farmers’ Union has condemned the changes, warning that they could:
– Reduce investment in farming
– Lower profitability for farms – Reduce the amount of land available for tenancies – Undermine domestic food production – Threaten the future of multi-generational family farms A UK Government and Parliament petition opposing the IHT reform has gained over 150,000 signatures, triggering a parliamentary debate. However, the government has so far remained firm, insisting that the policy “strikes a fair balance” between raising revenue and supporting the agricultural sector. Farmers argue that they are being unfairly targeted, despite government claims that the changes are about tax fairness. Many see this as a misunderstanding of the realities of farming life, where profit margins are tight, and long hours are often rewarded with little financial gain. Growing up in a farming family, I have seen first-hand the dedication it takes to keep a farm running. My father and generations before him have worked tirelessly for decades, navigating unpredictable weather, fluctuating crop prices, and changing government policies. My brother will eventually follow in his footsteps, not for financial gain but out of passion – because for many, farming is not just a job, it’s a way of life. This sentiment is echoed by thousands of young farmers, who worry that their dreams of taking over family farms are slipping away. Labour’s decision to reform IHT relief on farmland is, in part, a response to concerns that wealthy individuals have been exploiting the system to avoid tax. Groups like Tax Justice UK have highlighted cases where non-farmers have purchased agricultural land purely to shelter their estates from inheritance tax. Even public figures have been caught in the debate, such as Jeremy Clarkson, who admitted that IHT relief was a “critical factor” in his decision to invest in farmland. Targeting a substantial number of farms is deeply unsettling for the community. NFU representatives and industry leaders continue to press the government for amendments to the policy, warning that if left unchanged, it could lead to land disposals from private estates — impacting tenant farmers who rely on rented land for their livelihoods. Opposition parties are seizing on the backlash, with the Conservatives vowing to overturn the reforms if they return to power. The Conservative party leader has stated that the new provisions for IHT were “immoral”. Critics within the party have also warned that the reforms could have far-reaching economic consequences, “driving farmers to despair” and accused the Chancellor of “conspiring against our rural economy”. Want to write for the Legal Cheek Journal? Find out more.Labour’s inheritance tax reform is a defining moment for UK agriculture. The government argues that this change prevents tax avoidance and raises much-needed revenue, but the farming community sees it as an existential threat.
With protests mounting, political pressure building, and key industry groups demanding change, the battle over agricultural inheritance tax is far from over. Harry Cooke, a University of Exeter Law School graduate, is currently undergoing the LPC LLM course at the University of Law. He has a particular interest in rural law and policy and enjoys exploring the Devon countryside in his free time. The Legal Cheek Journal, sponsored by LPC Law, covers this critical issue in depth.
