Inheritance tax changes to affect more than 75% of English and Scottish farms of 50 hectares in size or more

Inheritance tax changes to affect more than 75% of English and Scottish farms of 50 hectares in size or more

Over three quarters of farms in England and Scotland of 50 hectares (124 acres) or more in size will be affected by the changes to Inheritance Tax, new independent analysis from AHDB shows. 

The Agriculture and Horticulture Development Board has calculated 42,204 out of 54,938 farms (76.8%) across the two nations will be impacted by the new tax rules, which will see the full 100% relief from Inheritance Tax restricted to the first £1m of combined agricultural and business property, from April 2026. 

The study looks at average balance sheet data mainly sourced from Defra, the Farm Business Survey and the Scottish Government. More than half affected are involved in cereals or general cropping production as their main enterprise, with the rest predominantly livestock producers or mixed farming operations. 

AHDB analyst Tom Spencer said: “Our calculations show that cereals and general cropping farms are the most likely to be affected due to their scale and asset size. For livestock farms, it is those businesses with single person ownership that are most at risk.”

AHDB has already reported that due to the low rate of return on net current assets in farming, the most cost-effective way a cereals producer could pay their expected tax burden would be to sell parcels of land.

AHDB’s Economics and Analysis Director, David Eudall, added: “The debate, on whether the change to Inheritance Tax is the right decision, is not for AHDB to comment on. Our priority is to help explain how this will impact many levy payers and support them on navigating a path through these challenges.  

“The first stage has been to identify the farms at risk, so they can review their own circumstances and implement appropriate actions. There are 300 working days until 1 April 2026, when the tax changes come into effect. This means 140 farming businesses across England and Scotland per working day, from today (28 January 2025) onwards, will need to ensure their business is set up to manage their tax implications.  

“It is critical for any affected farming enterprise to seek out expert tax and business planning advice. Succession planning was already important in agricultural farming businesses, now it is essential.”

You can listen to a more comprehensive analysis of AHDB’s findings along with the thoughts of tax expert Luke Cochrane in the latest Agonomics podcast here: Agonomics with David Eudall