Inheritance Tax on Farms

The recently announced changes to APR (Agricultural Property Relief) on farmland for Inheritance Tax purposes brings farms under the same rules as BPR (Business Property Relief). Many would argue that's only fair, and certainly a lot better than you or I would get.

If wealthy landowners decide to sell farmland due to the reduced tax benefits, we could see several shifts in the agricultural property market and farming sector.

With more farmland hitting the market, the supply would increase, which could drive prices down. Fewer wealthy buyers looking to purchase land purely for tax reasons would ease the competition, allowing prices to stabilize or even decrease. The demand from non-farming buyers would also likely fall, meaning land would be valued more realistically based on its farming potential. While farmland prices will still vary by location or soil quality, the overall trend could be lower price barriers as investors back off.

As land becomes more affordable, new farmers or smaller operations would have a better chance of buying land that was previously out of reach. Smaller family-run farms could thrive more easily, as there would be less competition from large investors driving up prices. This shift could also encourage younger or new farmers to get involved, particularly with lower land costs and potential government support, such as grants or programs aimed at helping them get started.

With land prices decreasing, many farms might fall below the inheritance tax thresholds, making it easier for small and medium-sized family farms to survive without facing high tax bills. The Agricultural Property Relief could also become more beneficial for smaller farms, allowing genuine farming operations to avoid hefty taxes. This would be a shift from the past when APR was often used by investors as a tax dodge.

Without the heavy involvement of tax-motivated investors, the market would likely shift to a focus on farmland’s actual agricultural value and its potential for sustainable farming. Land prices might reflect real productivity instead of being driven by speculative investment. The government could also offer more support to new farmers, which would help boost rural economies and drive agricultural innovation.

In the end, the departure of tax-driven investors could lead to a more balanced farmland market. With prices reflecting the true value for farming, it would be easier for new farmers to enter the market, small farms could avoid inheritance tax struggles, and the agricultural sector could move toward a more sustainable future.

In any case, there are other reliefs available that take the limit closer to £3m, rather than the headline figure of £1m, and the 7 year gift rule still applies. The NFU, being a lobby group for farmers, is likely to use figures that support their arguments and not include other available reliefs, so I would take their arguments with a pinch of salt. 

As for the right wing press, they're in the business of persuading the public that it's in their interests for the wealthy to retain their money and pay very little tax - tax which has to be made up by the very public they're gaslighting. They're actually quite successful in this and manage to whip up a storm from people who don't engage their brains and consider implications and consequences.

We knew the country's finances were in a parlous state and public services are crumbling. We were told before the election that would require taxes. Where on earth do people think this tax money is coming from - a magic money tree?