Farmers have expressed significant concern regarding the recent modifications to inheritance tax for agricultural properties, as outlined in the Budget announcement. Starting April 2026, inherited agricultural assets valued over £1 million, which previously enjoyed exemption, will now incur a 20% inheritance tax—half of the standard rate.

The estimates on how many farms will be affected vary widely. The highest projection suggests that as many as 70,000 farms may face impact over time. However, the annual count of farms likely to be affected is closer to around 500. Sir Ed Davey, leader of the Liberal Democrats, urged the government to heed the concerns of rural communities and reconsider this change, reiterating that about 70,000 farms could be impacted. This figure originates from the Country Land and Business Association (CLA), whose president, Victoria Vyvyan, warned that limiting agricultural property relief to £1 million could jeopardize numerous family-run farms and threaten food security.

This figure should not be interpreted as the number of estates subjected to inheritance tax each year; it represents an estimate of farms with sufficient value to incur such taxes. According to Yiorgos Gadanakis, an associate professor at the University of Reading, research indicates that approximately 30-35% of UK farms might exceed a valuation of £1 million. Given that there are about 209,000 farm holdings in total, this leads to an estimation between 62,700 and 73,150.

Alternatively, examining larger farms—those exceeding roughly 200 hectares—suggests around 70,000 could be liable for this tax based on current land prices. Sally Shortall from Newcastle University pointed out regional disparities in land values; English farms are likely to feel the most significant effects.

Importantly, a farm only incurs inheritance tax upon being passed down; hence the figure of 70,000 may not accurately represent immediate impacts. According to Paul Johnson from the Institute for Fiscal Studies (IFS), these changes would influence a relatively small number of high-value farms and noted that agricultural properties still enjoy more favorable treatment than in previous decades.

The Treasury projects that only about 500 farms will be materially impacted by these changes. Independent tax expert Dan Neidle believes that it could be even lower than this estimate. In the fiscal year 2021-22 alone, there were just 462 inherited farms valued above £1 million.

Under new regulations, these estates would face a 20% tax only on amounts exceeding £1 million. However, any property valued up to £325,000 remains exempt from tax obligations. For married farmers, an additional allowance brings the total untaxed amount up to approximately £2.65 million.

Steve Reed from the Department for Environment reiterated that most farmers will not see any change affecting them directly; only wealthier estates will face these new taxes. The Treasury expects these reforms will generate substantial revenue starting at £230 million in their initial year and potentially rising to £520 million by 2029-30.

Despite these projections, uncertainties remain according to the independent Office for Budget Responsibility (OBR). Sam Kirkham from Albert Goodman accountants highlighted a common misconception; while farm valuations may appear high, many farmers struggle with low returns—averaging around just 0.5%. As a result, farmers face challenging choices between sustaining their businesses and other life decisions amidst taxation pressures.