Agricultural property relief is set to be 'severely curtailed' after the government announced reform of the tax relief in today's autumn budget.
Chancellor Rachel Reeves outlined that assets over £1 million will get a 50% relief, with an effective rate of inheritance tax at 20%.
A £1m allowance - seemingly shared with business property - of 100% relief is being rolled out in April 2026, and assets in excess of this will only benefit from 50% relief.
The chancellor announced no relief changes to assets under £1 million. The measures will take effect from 6 April 2026.
They will apply not only to charges on death but lifetime transfers into trusts or to individuals, in addition to decennial and other charges for relevant property trusts.
"We will reform agricultural property relief and business property relief from April 2026," Ms Reeves said in her budget speech today (30 October).
"The first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all.
"But for assets over £1 million, inheritance tax will apply with a 50% relief at an effective rate of 20%,
"This will ensure that we continue to protect small family farms, with three quarters of claims unaffected by these changes."
Sarah Wray, senior associate at law firm Charles Russell Speechlys, said that APR would be 'severely curtailed' under the government's plans.
She warned that the announcement would likely raise 'significant concern' among thousands of farmers and landowners.
"Given land values, the impact of this reform will be felt throughout the sector; even small farms are very likely to face an inheritance bill from April 2026," she said.
"In the short term we’re likely to see individuals with agricultural property seeking to 'bank' the current more generous reliefs, whilst they still apply by transferring it into trust, or onto the next generation."
The Country Land and Business Association (CLA), which represents thousands of farmers and landowners, said Labour's decision was 'nothing short of betrayal'.
It estimates that capping agricultural property relief at £1m could impact 70,000 UK farms, in turn 'damaging family businesses and destabilising food security'.
CLA President Victoria Vyvyan said: “Labour has made repeated assurances over the last 12 months that it would not tamper with inheritance tax reliefs.
“This puts dynamite beneath the livelihoods of British farming, and flies in the face of growth and investment.
"In its attempts to raise more revenue the government will cause great damage, jeopardising the future of rural businesses up and down the country.
“Many farmers, operating on slim margins, will now face having to sell land to pay inheritance taxes."
Just before the budget was announced, the UK's four farming unions sent a letter to the government warning that changes to APR would have a 'crippling effect' on farming businesses.
The letter by the NFU, NFU Cymru, NFU Scotland and the Ulster Farmers Union detailed how any changes would have a 'devastating blow', particularly to family farms.
They pointed to farmer confidence being at its lowest level on record due to high production costs, extreme weather and uncertainty during the agricultural transition.
Liberal Democrat Environment Spokesperson, Tim Farron MP said the move was a 'family farm tax' which risked 'ringing the death knell' for local farmers.
"Small family-owned farms will also be hit by this and will be forced to sell up, with young people robbed of their opportunity to farm," he said.
“After years of the Conservatives taking rural communities for granted, it is deeply disappointing to see more of the same from this new government.
“We’ll be fighting tooth and nail to protect family farms from these changes."
