A new report highlights potential adjustments to Labour's controversial inheritance tax proposals, yet farming groups argue it underestimates the impact on older farmers and tenanted estates.
Produced by tax consultancy the Centre for the Analysis of Taxation (CenTax), the report argues that the current policy could be better targeted to protect family farms, a view echoed by industry leaders since last year’s budget.
The government plans to impose a 20% tax on inherited agricultural assets valued over £1 million – half the standard rate – from April 2026.
Farm leaders say the reforms are unlikely to meet their stated goals of reducing incentives to shelter wealth in farmland, safeguarding working farms, or generating the expected revenue, while placing a disproportionate burden on older farmers.
CenTax concurs that amendments are needed to achieve the government’s objectives and suggests a series of potential adjustments.
While the thinktank's researchers have not gone as far as many would have liked, the report concludes that “…if it were possible to identify changes that could extend protection of family farms whilst still achieving the government's other objectives (and also meeting its constraints), we think those would merit serious consideration.”
CenTax agrees with at least two adjustments to support family farms: the transferability of the combined 100% relief threshold for Agricultural and Business Property Relief between spouses and civil partners, and an increase in the 100% relief threshold to £2m. The report also considered alternative thresholds of £1.5m and £5m.
The study examined transitional arrangements, particularly the possibility of allowing elderly landowners to claim exemptions on assets transferred to the next generation within a shorter period than the standard seven years.
While CenTax acknowledged that those aged 75 and over would be most affected—and that more than half of impacted estates belonged to people aged 85 or above—the researchers did not recommend introducing a transitional regime.
NFU President Tom Bradshaw said the report, released on Thursday (14 August), “recognises that working farms will be disproportionately affected by this tax."
He added: “There are measures within the report that could ease the burden on the most vulnerable in our community and give farms greater confidence to invest in the future of food production.”
Mr Bradshaw emphasised that the findings “offer a timely opportunity ahead of the Finance Bill for meaningful discussions with government and officials, enabling us to tackle issues of fairness and affordability within the proposals. The NFU urges government to grasp this opportunity.”
The Country Land and Business Association (CLA) has voiced strong criticism toward the report. CLA President Victoria Vyvyan said: “Labour's favourite think tank has decided that a Labour government's policy is fundamentally good. That is no shock.
"Just like Treasury Ministers, however, CenTax has used a tiny amount of data to justify their view, and failed to speak to a single farmer or family business owner. If they had, they would understand - and I hope, care more - about the devastating consequences of the policy on the economy.”
She warned: “These reforms to inheritance tax will cost the Exchequer £2bn, with 200,000 jobs lost and £15bn in lost economic activity. This is the reality of what is happening.
"Enough of this nonsense, it is time for Sir Keir Starmer to show some leadership and tell Treasury Ministers they have it wrong and must change tack for the good of the country.”
Ms Vyvyan added that while raising the relief threshold might ease the impact for some businesses, it would not fully address the problem.
She stressed that Treasury must engage more with businesses and entrepreneurs to explore sustainable ways to stimulate growth, rather than pushing through a “short-sighted and damaging policy.”
While welcoming the report's release, the Tenant Farmers' Association (TFA) noted it did not address the unintended consequences on the tenanted agricultural sector, where private landlords with estates far exceeding the zero-rate threshold could face a significantly increased tax burden.
According to the association, many landlords are already adjusting letting policies, considering shorter terms and lower investment levels, to mitigate future tax liabilities.
Mr Dunn added: “Fitting with wider government policy, the TFA continues to make its long running argument that landlords letting property through secure tenancies under the Agricultural Holdings Act 1986 or tenancies of 10 years or more without fixed break clauses under the Agricultural Tenancies Act 1995, should be able to claim 100% relief from Inheritance Tax.
"In all other cases, landlords should be subject to the standard rate of Inheritance Tax. Although the researchers did not cover this aspect specifically, the change we propose is in line with their recommendation that serious consideration should be given to changes that could further support family farm businesses.”
