Typical family farm ‘would have to spend 159% of its profits for a decade to pay inheritance tax’, says rural land group
A typical family farm would have to put 159% of annual profits into paying the new inheritance tax every year for a decade and could have to sell 20% of their land, according to new analysis.
Chancellor Rachel Reeves announced in her 30 October budget farms would no longer get 100% relief on inheritance tax, and from April 2026 will have to pay 20% tax on farms worth over £1 million.
The announcement has sparked anger among farmers who argue this will mean higher food prices, lower food production and having to sell off land to pay for the tax.
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Ministers said the move will not affect small farms and is aimed at targeting wealthy landowners who buy up farmland to avoid paying inheritance tax.
However, analysis by the Country and Land Business Association (CLA), which represents owners of rural land, property and businesses in England and Wales, found a typical 200-acre farm owned by one person with an expected profit of £27,300 would face a £435,000 inheritance tax bill.
The plan says families can spread the inheritance tax payments over 10 years, but the CLA found this would require an average farm to allocate 159% of its profits each year for a decade.
To pay that, successors could be forced to sell 20% of their land, the analysis found.
Farmers protested against the plan outside a farming conference in Northumberland. Pic: PA
The CLA said their model shows how family farms, which are mostly asset-rich but cash-poor, would be forced into a cycle of stagnation, asset sales or debt to cover the tax.
This would threaten the long-term viability of the UK’s rural landscape and food security, the association said.
The government has said other tax relief will still apply to farmers, so if a married couple owns the farm they can pass on the land and property valued up to £3m to a child or grandchild tax-free.
This is made up of the £1m each of agricultural property allowance plus £500,000 each in standard tax-free allowance for passing on an estate worth less than £2m to children or grandchildren.
The CLA’s analysis found a 250-acre arable farm owned by a couple with an expected annual profit of £34,130 would still face an inheritance tax bill of £267,000 – 78% of its profit each year over a decade.
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Farmers feel ‘betrayed’ after budget
Gavin Lane, deputy president of the CLA, said: “Either the government isn’t being honest with the public about the true impact of these reforms, or they don’t understand the nature of rural businesses.
“I’d like to believe it is the latter and that they are prepared to listen to our input rather than continually trying to dismiss it.
“While they frame this as a tax on the wealthy, the reality is that ordinary family farms will be hit just as hard.
“Asking farms to use their income to pay a huge capital tax bill over 10 years, if indeed it is possible, will threaten the future of investment and the viability of the business.”
File pic: iStock
The Treasury said the change will make inheritance tax relief “fairer, protecting small family farms”.
An explanation of the plan on the government’s website said the top 7% (the largest 117 claims) of agricultural property relief claims account for 40% of the total relief, costing the taxpayer £219m.
The top 2% of claims (37 claims) account for 22% of agricultural property relief, costing £119m, it says.
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“It is not fair for a very small number of claimants each year to claim such a significant amount of relief, when this money could better be used to fund our public services,” the website adds.
It also says the chancellor announced £5bn to help farmers produce food over the next two years, alongside £60m for the Farming Recovery Fund to help farmers recover from the impact of flooding.
Sky News has contacted the Treasury for a comment on the latest analysis.
Sky News can reveal that the government has rowed back on a national compensation scheme for victims of child sexual abuse, despite it being promised under the previous Conservative administration.
Warning – this story contains references to sexual and physical abuse
A National Redress Scheme was one of 20 key recommendations made by the Independent Inquiry into Child Sexual Abuse (IICSA), but a Home Office report reveals the government has scrapped it because of the cost.
Marie, who is 71, suffered alleged sexual, physical, and emotional abuse at Greenfield House Convent in St Helens, Merseyside, between 1959 and 1962, and is still fighting for compensation.
Greenfield House Convent, where Marie says she was abused
As soon as she arrived as a six-year-old, Marie says her hair was cut off, her name changed, and she experienced regular beatings from the nuns and students.
She claims a nun instigated the violence, including when Marie was held down so that her legs were “spread-eagled” as she was sexually abused with a coat hanger.
Merseyside Police investigated claims of abuse at the convent, but in 2016, a suspect died before charges could be brought.
Marie has received an apology from the Catholic body that ran the home; she tried to sue them, but her claim was rejected because it was filed too long after the alleged abuse.
Marie, 71, is still fighting for compensation for the abuse she says she suffered as a child
In February, ministers said the law would change for victims of sexual abuse trying to sue institutions for damages, which was a recommendation from the IICSA.
Previously, people had to make a civil claim before they were 21, unless the victim could prove a fair trial could proceed despite the time lapse.
Campaigners argued for the time limit to be removed as, on average, victims wait 26 years to come forward. Changes to the 1980 Limitation Act could lead to more people making claims.
Peter Garsden, President of The Association of Child Abuse Lawyers
Civil cases ‘can take three to five years’
But Peter Garsden, president of the Association of Child Abuse Lawyers, worries that when it comes to historical abuse where the defendant is dead, institutions will still argue that it is impossible to have a fair trial and will fight to have the case thrown out of court.
Mr Garsden said it takes “between three and five years” for a civil case to get to trial.
He warned that claimants “can end up losing if you go through that process. Whereas the Redress Scheme would be quicker, much more straightforward, and much more likely to give justice to the victims”.
Victim awarded £10 compensation
Jimbo, who was a victim of abuse at St Aidan’s children’s home in Cheshire, took his case to the High Court twice and the Court of Appeal three times, but, after 13 years, all he ended up with was £10 for his bus fare to court.
Despite the Lord Justice of Appeal saying he believed that the abuse had occurred, Jimbo lost his claim because of the time limit for child sexual abuse claims to be made.
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Neither Marie nor Jimbo is likely to benefit from the removal of the time limit for personal injury claims, which is why Mr Garsden is calling on the government to implement a National Redress Scheme for victims of sexual abuse, as recommended by the IICSA.
Hundreds of millions paid to victims
The governments in Scotland and Northern Ireland have set up compensation schemes and paid hundreds of millions of pounds to victims.
In 2023, the then Conservative government said a similar scheme would be organised for England and Wales.
But the Home Office admitted in its Tackling Child Sexual Abuse: Progress Update that it “is not currently taking forward any further steps on the IICSA proposal for a separate, national financial redress scheme for all survivors of child sexual abuse”.
“In the current fiscal environment, this recommendation is very difficult to take forward,” it added.
For victims, the scheme was the last chance of compensation for a lifetime blighted by abuse.
“The money is about justice and about all the other people who have had to suffer this abuse,” Marie said.
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