Inheritance Tax Farm Relief Reform: What Farming Families Need to Know

Farming families across England, Wales and Scotland are navigating a fundamentally changed inheritance tax landscape following reforms to agricultural property relief announced in the October 2025 budget. The changes, which attracted significant protest from farming organisations and became one of the more contentious measures from Rachel Reeves’s budget statement, are creating substantial succession planning challenges for family farms that previously operated on the assumption that agricultural assets would pass largely free of inheritance tax.

Under the previous rules, qualifying agricultural property could attract up to 100 percent relief from inheritance tax, meaning that farms could theoretically be passed between generations without a tax bill on the agricultural elements of the estate. The reforms announced in October 2025 introduced a cap on the relief, meaning that above certain thresholds, the value of the farm becomes subject to the 40 percent inheritance tax rate applied to the excess.

The National Farmers’ Union and Country Land and Business Association mounted an immediate campaign against the changes, organising protests in Westminster and commissioning economic analysis suggesting that the reforms would threaten the viability of a significant proportion of family farms over the medium term. They argued that farm assets are typically illiquid — the land and buildings cannot easily be sold in part without disrupting the agricultural operation — creating situations where families face tax bills they cannot meet without selling the farm entirely.

The government maintained that the reforms were well-targeted and that the vast majority of family farms would be unaffected. HMRC data was cited in support of the position that only the largest holdings would face significant liability. Farming bodies disputed the government’s analysis, arguing it failed to capture the full extent of farm asset values in high-land-price regions such as the South East and East Anglia.