CAAV suggests inflation will add 19 per cent more farmers to inheritance tax

The Central Association of Agricultural Valuers (CAAV) said this would be as a result of inflation and frozen reliefs. 

“Our calculations point to the first decade of the proposed policy ending with 89,500 farming taxpayers liable for inheritance tax (IHT) on their farm assets,” said Jeremy Moody, secretary and adviser to the CAAV. 

“The first 10 years alone would add some 14,500 (19 per cent) to the CAAV’s assessment of 75,000 affected farming taxpayers over a generation,  simply because of inflation, if there is no policy change. More would follow as each year goes by.”

He said the main IHT relief for all taxpayers, the nil rate band, has been frozen at £325,000 since 2009, and the Budget now freezes it to 2030 – 21 years.  

“That gives no confidence that the £1m full relief for agricultural property relief (APR) and BPR will be protected against inflation,” added Mr Moody. 

“Even more farmers would therefore be caught than has been suggested.”

While the nil rate band would be used first for personal assets, which from April 2027 will include unused pension funds, it gives a measure of how inflation brings people into tax. 

When full APR and BPR were introduced in 1992, the nil rate band of £140,000 was worth some 56 acres of typical farmland, the CAAV  explained.

The £325,000, frozen since 2009, is now worth 29 acres, protecting less of a farm that would now often be larger than it was then. 

“Based on average annual inflation of 3% since 2009, it’s easy to see how quickly a lot more farmers will fall into this punitive tax band,” Mr Moody added. 

At the Budget Chancellor Rachel Reeves ended inheritance tax exemptions for farms worth more than £1 million, although in some cases that threshold could be as high as £3 million.

The move has led to protests from farmers who claim the death dues could force them to sell off land which could have been in a family for generations.