How many farms would be affected by Budget changes?

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Following the announcement on changes to inheritance tax for farms in the Budget, many farmers have expressed their dissatisfaction. From April 2026, inherited agricultural assets worth over £1m, previously exempt, will now be subject to inheritance tax at a reduced rate of 20%.

There have been various speculations about the number of farms that will be affected by these changes. Liberal Democrat leader Sir Ed Davey claims that around 70,000 farms will be hit as a result of this change. However, this figure is not for the number of estates subject to inheritance tax each year, but an estimate of the total number of farms worth enough to pay.

The Treasury estimates that approximately 500 farms per year will be impacted by the inheritance tax reform. The IFS director, Paul Johnson, stated that the changes will affect a remarkably small number of the most valuable farms. The figure of 70,000 is not an even distribution across the country and farms in England are expected to be worst hit.

In 2021-22, there were a total of 462 inherited farms valued above £1m according to HM Revenue and Customs. However, like the rest of the population, there is no inheritance tax on the value of property up to £325,000, meaning the untaxed total could be up to £2.65m for a married couple.

The Treasury expects that the changes to inheritance tax and Business Tax Relief will raise £230m in 2026-27, with this number rising to £520m by the end of the forecast in 2029-30. However, the independent Office for Budget Responsibility warns that there is high uncertainty around these figures.

Although it is commonly assumed that farmers must be wealthy, the value of farms passing down to the next generation does not realise that capital. Farm profits do not usually meet the additional cost of inheritance tax and government figures suggest that the average return on capital for farms is only about 0.5%

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