At Autumn Budget 2024, the Government took a number of difficult but necessary decisions on tax, welfare, and spending to restore economic stability, fix the public finances, and support public services. These were tough decisions given the situation inherited by the Government, but it has done so in a way that makes the tax system fairer and more sustainable.

Inheritance tax is paid on the estate (the property, money, and possessions) of someone who has died. The most recent four years’ worth of data show that amongst agricultural property relief claims, including those that also claimed business property relief, 47 per cent of the total Exchequer cost of the relief went to the top seven per cent of claims. It is not fair to maintain such a significant relief for a very small number of claimants, when this money could better be used to fund our public services.

That is why from 6 April 2026, the full 100 per cent relief from inheritance tax will be restricted to the first £1 million of combined agricultural and business property. Above this amount, there will be 50 per cent relief so inheritance tax will be paid at a reduced effective rate up to 20 per cent, rather than the standard 40 per cent. The new system remains more generous than it has been in the past: the rate of relief prior to 1992 was a maximum of 50 per cent on all agricultural and business assets, including the first £1 million.

This is on top of the other exemptions and nil-rate bands that people can access for inheritance tax too. This means that a couple with farmland, depending on their circumstances, can typically pass on up to £3 million to their descendants without paying any inheritance tax.

Full exemptions for transfers between spouses and civil partners continue to apply. This means that any agricultural and business assets left to a spouse or civil partner will be tax free.

Any transfers to individuals more than 7 years before death as gifts will continue to fall fully outside the scope of inheritance tax. Any tax related to these assets can be paid in instalments over 10 years interest free and it means landowners will not necessarily need to sell land or other assets.

The reforms are expected to result in up to around 520 estates claiming agricultural property relief, including those that also claim for business property relief, paying more inheritance tax in 2026-27. This means almost three-quarters of estates claiming agricultural property relief, including those that also claim for business property relief, will not pay any more tax as a result of the changes in 2026-27.

These are projections based on HMRC inheritance tax administrative data relating to previous years, which illustrate the distribution of claims where 100 per cent relief has been available on agricultural and business property. It is not possible to accurately infer a future inheritance tax liability from data on farm asset values. The number and value of affected estates, meaning how many estates making relief claims that would pay more inheritance tax as a result of the change, is affected by who the owners are, how many owners there are, any borrowing they have, and how they plan their affairs.

These reforms should also be seen in the broader context of the significant existing support for the farming industry in the wider tax system. This includes the exemption from business rates for agricultural land and buildings, the ongoing entitlement for vehicles and machinery used in agriculture to use rebated diesel and biofuels, and the exemption from the plastic packaging tax for the plastic film used by farmers to produce silage bales. Furthermore, farmers are able to add together their profits from farming for two years or five years and be taxable on the average of those profits, building flexibility into their tax arrangements for difficult years.

More broadly, the Government’s decisions at Autumn Budget 2024 provide £5 billion over two years for farming and land management in England which will restore stability and confidence in the sector, strengthening food security alongside nature’s recovery. This includes the largest ever budget directed at sustainable food production and nature’s recovery in our country’s history. Despite the difficult fiscal inheritance, £60 million of funding has also been prioritised for the Farm Recovery Fund to support farmers with the impact of severe wet weather over the last year.

The Government’s commitment to farmers and the vital role they play in feeding our nation remains steadfast. There is also an urgent need to repair the public finances, but the Government has maintained very significant levels of relief from inheritance tax beyond what is available to others. The Government believes the approach to reform strikes the right balance between providing significant tax relief to farms and fixing the public finances in a fair way.

HM Treasury