Cumbria's farmers await update on inheritance tax

With just over a week to go until the spring budget, farmers across Suffolk will be waiting to see if there are any more updates on the proposed inheritance tax.

What's the significance?

In the Autumn budget of 2024, Chancellor Rachel Reeves announced reform to inheritance tax around farms.

The significance of this is that Agricultural Property Relief (APR), has been around since 1984 and allowed land used for farming to be exempt from inheritance tax, meaning land owners such as farmers did not have to pay tax on their assets under certain conditions.

According to the government website, agricultural properties that qualified for Agricultural Relief include...

• Land or pasture that is used to grow crops or to rear animals
• Growing crops
• Stud farms
• Trees that are planted and harvested at least every 10 years (short-rotation coppice)
• Land not currently being farmed under the Habitat Scheme
• Land not currently being farmed under a crop rotation scheme
• The value of milk quota associated with the land
• some agricultural shares and securities
• Farm buildings, farm cottages and farmhouses

Some agricultural property does not qualify for Agricultural Relief, including:

• Farm equipment and machinery
• Derelict buildings
• Harvested crops
• livestock
• Property subject to a binding contract for sale

More information on what qualified for Agricultural Relief can be found here.

Changes to this tax

However, the announcement made by Rachel Reeves means that, from April 2026, land owners will now have to pay the tax at a rate of 20% for properties worth over 1 million pounds, payable in instalments over 10 years interest-free.

This is still in contrast to the standard rate of inheritance tax of 40%.

The Government confirmed that the valuation of the property would include things like farm vehicles, farm tools and livestock amongst other things.

Why has the inheritance tax changed?

The Government claim that bringing in the inheritance tax now will stop wealthy landowners from buying up the property to avoid the tax.

Speaking to our political correspondent Georgie Prodromou, Rachel Reeves said: "73 per cent of the farms will pay absolutely no more inheritance tax under the plans we've brought in.

"Some of the biggest land owners and larger farms will have to pay a bit more, but even for them it'll be half the rate that middle class families face at just 20 per cent.

"I think this is a fair package, protecting smaller, family farms, but asking some of those bigger land owners to pay a bit more in tax."

However, farmers have raised concerns, believing the Government have underestimated the amount, and size, of farms that will be impacted by their changes.

Farmers in Cumbria

Farmers in Cumbria and other parts of the country believe the Government have underestimated the amount, and size, of farms that will be impacted by their changes.

John Longmire is the chairman of Cumbria's NFU, he said: "The biggest issue facing farmers today as that we're short of people coming in, lack of investment and long hours. For the youth of today there's greater opportunities to get jobs elsewhere, with better work life balance and better prospects.

"The rewards are immense when you are in, but it's long, hard days and a lot of work. The biggest challenges is keeping and retaining young people in the industry.

"There needs to be an incentive. To benefit the industry, there has to be an investment, that people can see they can reinvest.

"Farming has transformed over a generation, my dad used to use horse and cart, now we're using 300 horse power tractors, it's immense how it's changed in 1 generation, but that can't stop.

"We've had a valuation on our farm, this is going to have massive implications across the board. Our son has invested heavily in our farm. We are potentially looking at a sizeable inheritance tax bill.

"Yes it's less than everyone else, but we're not working on farms that are cash rich. Yes there is an asset there, but it's only realised if it's sold, and you can't keep building an infrastructure around a farm, selling it, and moving on constantly.

"There's an argument of farmers should pay tax like everyone else. We do, we pay tax. If we make profit we pay tax as well as the taxes that are put on our businesses throughout the year.

"People are going to reevaluate where they go with their business now.

"These are built over generations, and the investment is there for the next generation. It's an incredibly cruel way of raising a tax that is going to have massive implications on the next generation who are going to have to find the money to pay that through no fault of there own. There's already a lot of pressure on keeping food prices as low as possible.

"It needs looked at."

Defra - Department for Environment Food and Rural Affairs

A Defra Spokesperson said: "Our commitment to farmers is steadfast.

"We are going further with reforms to boost profits for farmers by backing British produce, reforming planning rules on farms to support food production, and making the supply chain work more fairly, while tackling the mental health crisis in our farming communities by investing billions of pounds and recruiting 8,500 mental health professionals across our NHS.

"Our reform to Agricultural and Business Property Relief will mean three quarters of estates will continue to pay no inheritance tax at all, while the remaining quarter will pay half the inheritance tax that most people pay, and payments can be spread over 10 years, interest-free. This is a fair and balanced approach which helps fix the public services we all rely on."

This week we'll be taking a closer look at both sides of the argument and what the inheritance tax means for both farmers, and the Government.

With just over a week to go until the spring budget, farmers across Cumbria will be waiting to see if there is any more updates on the proposed inheritance tax.