Overview: Rumours of an IHT U-turn
As the budget approaches, whispers of potential changes to the inheritance tax (IHT) reforms for farms have sent ripples through rural communities. Last year’s plan to impose a 20% IHT on estates over £1 million sparked widespread protests and fears that small farms could be forced to sell to cover tax bills. New reports suggest Whitehall is weighing a significant change: raising the IHT threshold from £1m to as high as £5m for individuals and £10m for couples. While this would exclude many smaller farms from liability, it would also remove 50% relief on estates that exceed the new threshold. The tension between relief and revenue remains at the heart of the debate.
What the proposed change could mean for farms
Supporters of a higher threshold argue that the shift would rescue the smaller, family-run farms that lie just below the current £1m barrier. By widening the gate, the most vulnerable farms would avoid tax-triggered sales, preserving rural livelihoods and traditional farm handovers. Yet the scheme isn’t a clean exemption. Keeping the 50% relief off for estates above the new ceiling would still hit larger farms with substantial holdings and, by extension, the broader agricultural sector that relies on stable, local food production.
Two distinct strands of impact
- Smaller farms: A higher threshold could safeguard family legacies, enabling heirs to keep working the land without facing crippling tax demands as they take over management roles.
- Larger farms: With relief curtailed at higher values, bigger estates could shoulder a greater share of IHT, potentially pressuring revenues and prompting strategic restructuring to minimise liability.
Voices from the farming community
Richard Cornock, who runs a small dairy farm in south Gloucestershire that has stood in his family since 1822, spoke candidly about the stress the IHT debate has caused. His son Harry is already in training to become a farm manager, and Richard’s wish is straightforward: to pass the farm on without the family fortune being eaten by tax bills. “I’ve been under so much stress like most farmers worrying about this tax,” he said. “And I really hope they do push the boundaries on the thresholds, because the £1m proposal at the moment is ridiculous.”
The emotional weight of the issue is clear. Another farmer, who preferred not to be named, described a feeling shared by many: the sense that the policy debate has moved faster than the ability to plan multi-generational stewardship. The stress is not merely financial; it’s existential for families whose livelihoods and identities are tied to the land.
Government stance and political stakes
The government has avoided commenting on specific speculation about potential changes, reiterating that it defends the IHT reforms and noting that most estates would not be liable. For those who are, the option to spread payments over a decade remains part of the policy framework. Labour, facing pressure from rural voters who have shifted allegiance in some regions, is under scrutiny to present a credible plan that reduces anxiety while maintaining fiscal goals.
Is an IHT compromise possible?
Analysts and farmers alike recognise that any adjustment is a balancing act between fairness, sustainability, and revenue. A higher threshold could alleviate immediate financial pressure on small farms, but critics say it may just postpone a deeper problem: how to keep farming viable across generations when land and assets are central to family heritage. The “insolvable” nature of the challenge, as one farmer put it, suggests that a nuanced approach—potentially combining a higher threshold with targeted relief measures and transitional support—might be more effective than a blunt policy shift.
Bottom line
While rumoured tweaks to the IHT regime offer glimmers of relief for smaller farms, the social and economic consequences are nuanced. For many farming families, the question is not just about the tax bill today, but about the ability to pass a viable, cherished business to the next generation. As the budget looms, the debate will continue to unfold, with the farming community advocating for reforms that preserve both livelihoods and land for the long term.
