Rural Consultancy Warns of Tax Changes Impacting Small Farms

What's Happening?

Family farms in Britain are facing potential financial challenges due to anticipated changes in inheritance tax rules. The rural consultancy Galbraith has raised concerns that the government's budget may introduce further inheritance tax reforms, which could force some family-run farms to sell. Nick Ainscough, a senior associate at Galbraith, highlighted the unaffordability of inheritance tax payments for the next generation of farmers. Under the new measures set to take effect in April 2026, only the first £1 million of qualifying property per individual or trust will benefit from 100% agricultural property relief or business property relief, with any value above receiving only 50% relief. These reforms are expected to affect more working farms than government estimates suggest, leading families to delay investments or consider asset sales.

Why It's Important?

The potential tax changes could have significant implications for the agricultural sector, particularly for small family farms already struggling with volatile farmgate prices and changing regulations. The reforms may strip farming families of essential succession planning tools, impacting long-term investment decisions and profitability. If enacted, these changes could lead to a wave of farm sales, altering the landscape of rural communities and potentially reducing agricultural output. The consultancy warns that the government's policy is based on flawed data, which could exacerbate the financial difficulties faced by these farms.

What's Next?

With the budget announcement expected in the coming weeks, rural businesses are preparing for the possibility of these tax changes becoming reality. The autumn budget on November 26 may introduce tighter rules on lifetime gifting allowances and potentially exempt transfers, further complicating succession planning for farming families. Stakeholders in the agricultural sector are likely to advocate for reconsideration of these measures, emphasizing the need for policies that support the sustainability of small farms.

Beyond the Headlines

The proposed tax changes highlight broader issues within the agricultural sector, including the need for accurate data to inform policy decisions. The potential impact on small farms underscores the importance of balancing fiscal policy with the economic realities faced by rural communities. Long-term shifts in farm ownership and management could result from these changes, affecting local economies and food production systems.