AHDB has calculated 42,204 out of 54,938 farms (76.8%) in England and Scotland that are 50 hectares (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%).
The study looks at average balance sheet data mainly sourced from Defra, the Farm Business Survey and the Scottish Government.
More than half of those affected are involved in cereals or general cropping production as their main enterprise, with the rest predominantly livestock producers or mixed farming operations.
The NFU has repeatedly warned of the risk the changes to APR and BPR (Agricultural Property Relief and Business Property Relief) pose to family farms throughout its Stop the Family Farm Tax campaign, with the majority of farms not earning enough money to pay the potential inheritance bill without selling off some of their land or business.
New analysis ‘speaks volumes’
Responding to the news, NFU President Tom Bradshaw said: “The fact that the government’s own levy board has now come to the same conclusion as the NFU, that 75% of commercial farm businesses could be affected by this policy – more than 42,000 farms – speaks volumes.
“It could not be clearer that the data behind this abhorrent family farm tax is wrong and that the Treasury has drastically underestimated the scale of the impact on British farming and food.”
“It could not be clearer that the data behind this abhorrent family farm tax is wrong.”
NFU President Tom Bradshaw
The new analysis follows a week of milestones for the Stop the Family Farm Tax campaign including:
- the OBR (Office for Budget Responsibility) highlighting the issues the proposals could cause for elderly farmers
- a letter written by Efra Committee chair Alistair Carmichael to the Prime Minister, questioning the accuracy of the data behind the policy
- all of the UK's major retailers publicly backing the campaign out of concern for what the policy will mean for the UK's food security
- more than 27,000 people adding their signatures to the NFU's stop the family farm tax petition which was handed into No.10 on Friday.
Tom added: “As the representative voice of more than 44,000 farm businesses, all we want to do is sit down with the Chancellor and discuss a way forward but, so far, she has ignored our requests.
“Will she also choose to ignore the independent farming experts on its own levy board?”
The NFU’s own impact analysis, produced in consultation with Treasury and OBR economists found that, rather than the 27% suggested by the government, it is expected that 75% of commercial family farms will be above the £1m threshold.
Looking at sector impacts, the tax charge resulting from a £1m threshold would wipe out returns for an average cereals farm and around half of returns for average dairy farms.
140 business per day must prepare
AHDB analyst Tom Spencer warned that cereals and general cropping farms are most at risk, as well as single-person ownership livestock farms.
“The debate, on whether the change to Inheritance Tax is the right decision, is not for AHDB to comment on,” AHDB’s Economics and Analysis Director, David Eudall added.
“Our priority is to help explain how this will impact many levy payers and support them on navigating a path through these challenges.
“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.”
Key assumptions for AHDB’s analysis:
- Farm holdings of less than 20ha were excluded on the assumption they are not commercial enterprises. This leaves a total of 62,425 farms in England and 19,072 farms in Scotland.
- Total assets for farm holdings below 50ha assumed to be less than £1.325m and do not fall into a category at risk of being affected.
- Maximum inheritance tax-free threshold assumed to be £2.65m if using both spouses, APR/BPR and Nil Rate Band.
- Unmarried/divorced person with children/grandchildren can pass on a maximum of £1.5m tax-free. Without children/grandchildren it is £1.325m tax-free.
- Total assets for farm holdings above 100ha assumed to be more than £2.65m and therefore fall into the category of those at risk of being affected.
- An average farmhouse in England is valued at £459,400.
