Benn says majority of NI farms unaffected by Budget

Hilary Benn told BBC News NI that the majority of farms will remain unaffected by the decision to change inheritance tax relief for farmers

The Northern Ireland secretary has defended Labour's first Budget in 14 years and its impact on farming.

Hilary Benn said the majority of farms would be unaffected by the decision to change inheritance tax relief for farmers.

However, Ulster Farmers' Union president William Irvine has called it "a blow" to the agricultural sector.

In Wednesday's budget, Chancellor Rachel Reeves announced that, while there would continue to be no inheritance tax due on combined business and agricultural assets worth less than £1m, above that assets would be taxed at 20%, from April 2026 - half the general rate of inheritance tax.

A £1.5bn package of extra funding for Stormont was announced by the Chancellor on Wednesday.

Speaking on BBC's Good Morning Ulster programme, Benn described the Budget as delivering "the biggest real-terms settlement since the start of devolution for Northern Ireland".

However, some small business owners and young farmers have said the change in agricultural property relief (APR) is likely to have a "devastating" impact.

Richard Beattie from the Young Farmers Union said that "most farmers across Northern Ireland are already being impacted by land and asset inflation".

"The sustainability of the family-farming business is made a lot more difficult with the added burden of inheritance tax," he added.

Richard Beattie from the Young Farmers Union said the majority of farms in NI will be negatively impacted by the Labour budget

"For a young person to take on a potentially six-figure inheritance tax bill on the family farm business is a huge debt burden," he added.

Mr Irvine said the presidents of the four farming unions wrote to the chancellor urging her to maintain inheritance tax reliefs for farm businesses.

"These changes to APR compromise the liquidity needed for succession planning on farms of all sizes, eroding the very foundation of our agricultural sector," he added.

Speaking after the Budget on Wednesday he said farmers may be asset rich, but were cash poor.

He added he thinks there will be fewer farms in family ownership as a direct result of this policy.

"[The] majority of farms in England and Wales are maybe tenancy agreements where farmers don't own the land. Whereas specifically in Northern Ireland the majority of farms are family owned, they own the assets, the land, the buildings, the livestock."

On Thursday, Benn said the majority of farms will remain unaffected by the measures.

“There will be no inheritance tax on the first one million, the rate after that will be half the general inheritance tax rate of 40%," he said.

"The treasury says they expect only around 500 agricultural estates across the UK to be affected next year."

He added that if a farmer passes their estate to a spouse, there is no inheritance tax to be paid, and that they can pay the inheritance tax liability over the course of 10 years.

The Irish Farmers Journal annual land price reported that the prices paid for agricultural land in Northern Ireland in 2023 averaged approximately £13,800 (€15,500) per acre (0.4 ha).

Subsidies no longer 'ring-fenced'

Subsidies paid to Northern Ireland farmers will no longer be "ring-fenced" but will have to be decided through Stormont's Budget process.

Before Brexit subsidies were paid directly from the European Union.

In the years since Brexit the UK's devolved governments received a ring-fenced addition to their usual Treasury funding to pay subsidies.

The government said that from next year that arrangement will no longer apply.

The money previously ring-fenced for subsidies will now form part of each devolved government’s "block grant".

A spokesperson for Stormont's Department of Agriculture, Environment and Rural Affairs (Daera) said: "From 2025-26 agriculture and fisheries funding has been included in the Northern Ireland Executive’s baseline at the same level as 2024-25.

"It will therefore be for the executive to decide on the level of funding to be provided... This will be agreed as part of the executive’s Budget."