New inheritance tax rule is 'nail in coffin' and spells 'disaster' for one industry

Family farmers have warned new inheritance tax rules from the Labour Party government are a "nail in the coffin". Discussing the changes from Chancellor Rachel Reeves, Andrew Brown says the rules will stop wealthy people avoiding tax but will harm small farmers.

Ms Reeves announced that, from April 2026, farms and other business property, which had been passed on to heirs tax-free, will fall within inheritance tax (IHT). Inheritors will have to pay 20 per cent of their value above £1m, half the headline inheritance tax rate of 40 per cent, Ms Reeves went on to confirm last week.

The National Farmers’ Union has labelled the plans “disastrous” for the industry. Brown said: “I think this is ultimately a good idea, because some of the very, very rich landowners aren’t farmers, they’re people who just bought land to take advantage of the IHT rules.

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“So, if this stops very wealthy people from buying farmland to avoid taxes, then all the better, as those people could afford to pay the tax anyway. I don’t disagree with the principle, but there were better ways of doing it. The threshold is too low, which will affect a lot of people, and it should be gradual, so 5%, say, for up to [a farm value of] £5m, then 10% until £10m, and so on, to a maximum inheritance tax rate of 50% for farms worth over £50m. That would have been fairer.”

But a second fumed: “This could be the death knell for many family farms.” They branded the new rules "awful". They said: "Farming is different to many other businesses, it’s also a home. They’re not big or expensive houses, but they’re a roof over our heads.

"If you have to sell the farm, or part of it, you lose the home as well.”