County Fermanagh countryside. Picture: Cliff Donaldson
James McCluggage, Policy manager, writes:
Farmers feel misled by the government’s recent changes, which contradict Labour’s previous assurance that it had “no intention of changing APR.” Just months ago, the Chancellor signalled which taxes were off the table for reform, and many farmers who see themselves as “working people” feel betrayed.
The new policy introduces a £1 million threshold on APR and BPR, with inheritance tax charged at 20% above this level. This change could mean that family members who have worked on farms for decades may need to sell to cover the tax bill after a parent’s death. While APR is just one inheritance tax relief tool, it’s crucial in unplanned circumstances, like sudden deaths. The Treasury asserts that three-quarters of farms will remain unaffected by the change – a figure many in the industry find surprisingly optimistic.
In reality, this threshold will likely impact more than a quarter of farms that contribute to food production and rural jobs. Farming generates low returns, with capital returns averaging under 1% after wages, meaning inheritance tax could force many to split or sell farms.
APR has historically driven investment into farming, supporting farmland purchases and the renewal of farming generations. Reducing APR’s appeal, especially at a lower threshold, may discourage this investment which could in turn, reduce land values. In summary, this unexpected policy reversal – based on contested data, feels out of touch with the needs of hardworking family farms.
