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Inheritance tax changes to affect more than 75% of English and Scottish farms of 50 hectares in size or more
Tuesday, 28 January 2025
Over three-quarters of farms in England and Scotland of 50 ha (124 acres) or more in size will be affected by the changes to Inheritance Tax, a new independent analysis from AHDB shows.
We have calculated that 42,204 out of 54,938 farms (76.8%) across the two nations will be impacted by the new tax rules, which will see the full 100% relief from Inheritance Tax restricted to the first £1m of combined agricultural and business property, from April 2026.
The study looks at average balance sheet data mainly sourced from Defra, the Farm Business Survey and the Scottish Government. More than half affected are involved in cereals or general cropping production as their main enterprise, with the rest predominantly livestock producers or mixed farming operations.
AHDB analyst Tom Spencer said:
"Our calculations show that cereals and general cropping farms are the most likely to be affected due to their scale and asset size. For livestock farms, it is those businesses with single-person ownership that are most at risk."
A detailed breakdown of our analysis can be found further down this page.
We have already reported that due to the low rate of return on net current assets in farming, the most cost-effective way a cereals producer could pay their expected tax burden would be to sell parcels of land.
AHDB’s Economics and Analysis Director, David Eudall, added:
"The debate, on whether the change to Inheritance Tax is the right decision, is not for AHDB to comment on. Our priority is to help explain how this will impact many levy payers and support them on navigating a path through these challenges.
"The first stage has been to identify the farms at risk, so they can review their own circumstances and implement appropriate actions. There are 300 working days until 1 April 2026, when the tax changes come into effect.
"This means 140 farming businesses across England and Scotland per working day, from today (28 January 2025) onwards, will need to ensure their business is set up to manage their tax implications.
"It is critical for any affected farming enterprise to seek out expert tax and business planning advice. Succession planning was already important in agricultural farming businesses, now it is essential."
How many farms in England and Scotland will be affected by the new rules on inheritance tax?
Table 1: Holdings in England of 50–100 hectares
England 50-100 ha | Cereals | General cropping | Dairy | Lowland livestock | LFA livestock | Pigs | Poultry | Mixed | Horticulture |
---|---|---|---|---|---|---|---|---|---|
Total holdings | 4,299 | 2,767 | 1,510 | 4,282 | 1,944 | 201 | 170 | 1,392 | 439 |
2 x spouse with kids/widowed with kids | 2,812 | 1,810 | 988 | 2,800 | 1,271 | 131 | 111 | 910 | 287 |
1 x person with kids | 950 | 612 | 334 | 946 | 430 | 44 | 38 | 308 | 97 |
1 x person no kids | 107 | 69 | 38 | 107 | 49 | 5 | 4 | 35 | 11 |
More than 2 siblings ownership | 430 | 277 | 151 | 428 | 194 | 20 | 17 | 139 | 44 |
Total affected | 3,869 | 2,490 | 1,359 | 1,053 | 478 | 201 | 42 | 1,253 | 108 |
Bold = our estimate of the number of holdings negatively affected.
Source: AHDB
Table 2: Holdings in England of 100+ hectares
England >100 ha | Cereals | General cropping | Dairy | Lowland livestock | LFA livestock | Pigs | Poultry | Mixed | Horticulture |
---|---|---|---|---|---|---|---|---|---|
Total holdings | 8,765 | 3,518 | 2,880 | 2,991 | 2,978 | 222 | 221 | 2,597 | 397 |
2 x spouse with kids/widowed with kids | 5,732 | 2,301 | 1,884 | 1,956 | 1,948 | 145 | 145 | 1,698 | 260 |
1 x person with kids | 1,937 | 777 | 636 | 661 | 658 | 49 | 49 | 574 | 88 |
1 x person no kids | 219 | 88 | 72 | 75 | 74 | 6 | 6 | 65 | 10 |
More than 2 siblings ownership | 877 | 352 | 288 | 299 | 298 | 22 | 22 | 260 | 40 |
Total affected | 7,889 | 3,166 | 2,592 | 2,692 | 2,978 | 222 | 199 | 2,337 | 357 |
Bold = our estimate of the number of holdings negatively affected.
Source: AHDB
Table 3: Holdings in Scotland of 50–100 hectares
Scotland 50–100 ha | Cereals | General cropping | Dairy | Lowland livestock | LFA livestock | Pigs | Poultry | Mixed | Horticulture |
---|---|---|---|---|---|---|---|---|---|
Total holdings | 501 | 1,362 | 173 | 319 | 1,825 | 20 | 20 | 339 | 27 |
2 x spouse with kids/widowed with kids | 328 | 891 | 113 | 209 | 1,194 | 13 | 13 | 222 | 18 |
1 x person with kids | 111 | 301 | 38 | 70 | 403 | 4 | 4 | 75 | 6 |
1 x person no kids | 13 | 34 | 4 | 8 | 46 | 1 | 1 | 8 | 1 |
More than 2 siblings ownership | 50 | 136 | 17 | 32 | 183 | 2 | 2 | 34 | 3 |
Total affected | 123 | 335 | 43 | 78 | 449 | 18 | 18 | 83 | 24 |
Bold = our estimate of the number of holdings negatively affected.
Source: AHDB
Table 4: Holdings in Scotland of 100+ hectares
Scotland >100 ha | Cereals | General cropping | Dairy | Lowland livestock | LFA livestock | Pigs | Poultry | Mixed | Horticulture |
---|---|---|---|---|---|---|---|---|---|
Total holdings | 762 | 1,964 | 435 | 338 | 4,131 | 35 | 36 | 844 | 62 |
2 x spouse with kids/widowed with kids | 498 | 1,284 | 284 | 221 | 2,702 | 23 | 24 | 552 | 41 |
1 x person with kids | 168 | 434 | 96 | 75 | 913 | 8 | 8 | 187 | 14 |
1 x person no kids | 19 | 49 | 11 | 8 | 103 | 1 | 1 | 21 | 2 |
More than 2 siblings ownership | 76 | 196 | 44 | 34 | 413 | 4 | 4 | 84 | 6 |
Total affected | 686 | 1,768 | 392 | 304 | 3,718 | 32 | 32 | 760 | 56 |
Bold = our estimate of the number of holdings negatively affected.
Source: AHDB
Key assumptions for AHDB’s findings on Inheritance Tax:
- AHDB has calculated 42,204 out of 54,938 farms (76.8%) in England and Scotland that are 50 ha (124 acres) or more in size will be affected. That is 33,286 farms out of 41,602 (80%) for England and 8,918 farms out of 13,336 for Scotland (67%).
- Farm holdings of less than 20ha have been excluded as they are assumed to not be commercial farming enterprises. Therefore, it is assumed that in total there are 62,425 farms in England and 19,072 farms in Scotland.
- When calculating total assets of farm holdings below 50ha it is assumed that average farm values will be less than £1.325m and will therefore not fall into a category that is at risk of being affected.
- It is assumed that the maximum threshold that can be handed down inheritance tax-free is £2.65m if using both spouses, Agricultural Property Relief/Business Property Relief and Nil Rate Band (NRB). This is due to the tapering down of the NRB to £0 once the value of total estate is £2.65m. We are aware there will be instances where this tapering is not reflective of real estate values, for the purposes of this analysis we have used the £2.65m threshold in absence of other data. It is assumed that this can be accessed by a married couple with or without children on the basis that they have a rigid partnership agreement in place. If a rigid partnership agreement is not in place the maximum amount that can be passed on tax-free is £1.65m.
- It is assumed that an unmarried or divorced person with children/grandchildren can pass on a maximum of £1.5m tax-free and that an unmarried or divorced person with no children/grandchildren can pass on a maximum of £1.325m tax-free.
- When calculating total assets of farm holdings above 100ha it is assumed that average farm values will be more than £2.65m and therefore fall into the category at risk of being affected. This is based on average land values of all farm types, average balance sheet data (including debt) of all farm types and tenancy types and detached rural property values.
- It is assumed that a farmhouse in England is the average value of a detached rural property quoted at £459,400.
- We have a filler figure of 10% that represents the proportion of businesses that are owned across more than two siblings meaning they could have a much larger tax-free threshold.
- We currently do not have a figure for a percentage of businesses that have a rigid partnership agreement in place that would allow the farm to access the full £2.65m tax-free allowance. Our statistic currently assumes that every married couple has this in place.