The government’s inheritance tax figures are 'increasingly at fault' as 'even more' farmers are set to be impacted by the controversial changes.
This is according to new analysis by the Central Association of Agricultural Valuers (CAAV), which warned that 'another swath of farmers' could be affected.
The body recently detailed that the government had under-estimated the number of farmers affected by a factor of at least five– 75,000 producers over a generation, not 500 in 2026/27.
However, it said that new 'deeper analysis' has unveiled more farmers, who had previously been excluded from the figures, would be impacted.
From April 2026, agricultural property relief (APR) and business property relief (BPR) rules will be changed, resulting in a 100% relief on the first £1m of assets and then 50% relief on assets after that, equating to an effective tax rate of 20%.
In simple terms, where land, dwellings, machinery, animals and other assets are worth in excess of £1 million, there will be a £200,000 tax levy owed.
Jeremy Moody, secretary of CAAV, said: “Looking at HMRC’s express advice on tax returns, it states that where full BPR applies - as in most farming cases - the values given in tax accounts should be used, not the open market value.
“Farmers’ accounts for assets that qualify for BPR – like machinery and livestock – are based on historic cost, meaning they will be valued at significantly less than open market value.”
However, the new rules will mean that all assets will need to be accounted for at current market value, bringing significantly more people into paying inheritance tax and adding more cost to those already affected.
The CAAV’s latest research, published today (12 December), shows that this change will have a particular effect on many livestock farms.
Mr Moody continued: “Not only does HMRC allow that the ‘deemed cost’ for cattle in accounts is 60% of market value, but the statutory ‘herd basis’ option for accounting for tax on breeding and production animals is based on the original cost of a herd or flock.
“Market value would mean a potentially massive uplift over the accounting value for a long-standing dairy herd, for example," he explained.
"When BPR was offered at 100% on these assets, it was pragmatic of HMRC not to require them to be independently valued, so saving all parties time, effort and cost.
"But now livestock, machinery, silage and other operational farming assets will have to be valued upon death, and tax paid on anything worth over £1m."
The CAAV's new analysis means that yet more money will have to be found to pay the tax, whether by selling more land, more operational business assets, or foregoing more income and investment.
Mr Moody said that it was 'clear from the outset' that the government had not appreciated the potentially devastating implications of this new farm tax.
"Not only did our original research show it had underestimated its impact five-fold, by omitting large numbers of farmers from its figures, it’s now clear that even more people will be affected.
"This hurts the people it claims to protect and protects those it claims to hurt. It is time to drop this tax," he concluded.
