Changes to Agricultural Property Relief (APR) announced as part of in the UK Chancellor’s Autumn Budget this week could “wipe out” succession plans for many farmers in Northern Ireland, according to Farmers For Action (FFA).
As part of the budget, inheritance tax will now be paid on the excess above the £1 million threshold at a rate of 20%.
Up to now, all farming businesses had been eligible for full agricultural property relief.
The move has lead to widespread criticism from farming organisations who believe the move will lead to the break-up of family farms and impact the ability to meet environmental targets.
FFA
Sean McAuley from the FFA Steering Committee said the inheritance tax announcement “will just about wipe out succession planning for many of Northern Ireland’s family farmers and could change family farming as we know it forever”.
He said he hopes that the Labour Party understand that “food security” is now “in tatters”.
“In short, they have learned nothing from Covid-19, the Ukrainian war and accelerated climate change.
“Even as we speak this week with Spain’s accelerated climate change disaster in Valencia now affecting food exports even to the UK – the Labour Parties reputation is alive and well – tax and spend,” he said.
The FFA representative noted that over a third of Northern Ireland farmers are aged 65 or over.
“This is another hit for family farms, many will be forced to sell land to pay this tax bill to allow the next generation to go forward on a reduced sized farm.
“That’s not to mention the further hit of increased capital gains tax to pay on the land they may have to sell if value has increased since the time of purchase,” he said.
Costs
McAuley added: “It goes from bad to worse, in that full time employees on farms will cost almost an extra £2,500 per annum on top of this farmers purchase from 123 different suppliers and those suppliers will be hit with similar increase costs and have to pass them on to guess who – the farmer.
“Then we have a new tax burden levied on double cab pick-up (DCPUs) vehicles with a payload of one tonne or more.
“To conclude, every farm organisation in Northern Ireland needs to now pile the pressure on every MLA in Stormont to take forward the Northern Ireland Farm Welfare Bill – currently with the Agriculture Committee.
“With farm support money melting and farm gate prices abysmal, this is the only lifejacket in town and would return Northern Ireland farmers a minimum of the true cost of production inflation linked plus a margin for their produce at the farm gate.
“If enacted, this would turn farming around financially – from being mostly cash poor and asset rich to then having the money to pay their bills like any other business.”
Succession
Meanwhile, the Agriculture and Horticulture Development Board (AHDB) said that a “significant number of family farms” may be impacted by the Chancellor’s announcement, limiting 100% APR and business property relief to the first £1 million of value from April 2026.
AHDB said the changes mean that the average farm with a £2.2 million holding value would be required to pay £240,000 inheritance tax, repayable over a period of 10 years.
“These changes may encourage farmers to think about succession earlier than they would otherwise,” Sarah Baker, AHDB head of economics, said.
“For example, there is a seven-year rule which applies in the case of land transfers.
“This means that any land gifted to an individual will be free of inheritance tax after seven years. Basically, the benefactor must live for seven years or more after gifting the land,” she added.
Although the Chancellor announced that the farming budget would remain unchanged at £2.4 billion for the next financial year, analysis by AHDB shows that the real value of this money has been significantly reduced by inflation, with farm business costs rising on average by 44% since 2019.
“The other consequence of the budget measures is that farm businesses will have to carefully consider operating and investment decisions, as these affect the value of the business and therefore have inheritance tax implications,” David Eudall, AHDB economics and analysis director, said.
“This is of particular concern to us if there is a knock-on impact on agricultural productivity and therefore reduces our levy payer’s resilience to market shocks. We are also conscious there may be unintended consequences on self-sufficiency and food security,” he said.
