Most farmers unaffected by budget tax changes, IFS says, despite fears children could be robbed of legacy

Halloween isn’t the only thing giving UK farmers a scare this week.

Many say the first Labour budget for over a decade has been disastrous for small farms and their future.

Feeling blindsided by tax rises? Budget analysis

Chancellor Rachel Reeves announced that, although there will continue to be no inheritance tax on combined business and agricultural assets worth less than £1m, for anything valued above that there would be a 50% relief, at an effective rate of 20%, from April 2026.

The National Farmers Union says the decision could result in farmers having to either borrow money or sell off parcels of land to pay the tax.

Paul Tompkins raises a herd of 400 dairy cows on a 300 acre (4.7 square mile) farm near York.

He, and thousands like him, fear that the new £1m limit on inheritance tax relief on farmland will rob his children of their farming legacy.

“I thought this budget was going to help working people, and I see myself and other small farmers to be among those working people,” he says.

“I shouldn’t have to be worried that I’m going to be fleeced by the government and have to face the fact my kids might not be able to keep this farm, which has been handed down through four generations, going in the future.”

Shadow secretary of state for rural affairs Steve Barclay posted on X that Labour had “broken a clear promise they made to our farmers”.

The government says only a small number of the largest estates will be affected, and some financial experts agree.

Paul Johnson, Director of the Institute for Fiscal Studies (IFS), says: “What the budget did was reduce the amount of additional relief that farmers get on agricultural land.

“It still means they’ll be significantly more generously treated than the rest of us and still more generously treated actually, than farms used to be in decades past.

“The changes will affect actually a remarkably small number of some of the most valuable farms. The majority will still not be affected by this.”

But the Country Land and Business Association believes up to 70,000 farms could be affected. There are about 209,000 farm holdings in the UK, according to the government.

The government has confirmed it would be maintaining the £2.4bn farming budget for England in 2025/26, and says its commitment to farmers remains “steadfast”.

Read more:
Spain floods latest: Looting breaks out as people trapped
Man held after £300k cheese theft
Food prices could soar after budget

But farmers like Paul Tompkins still feel betrayed by the chancellor and maintain that the only fair thing for her to do is to completely reverse her decision.