Minister points to 'stark reality' of changes to inheritance tax

Most farmers and agricultural land owners have previously been exempt from inheritance tax

A £1m cap on agricultural property relief could put farmers off investing to meet environmental challenges, Northern Ireland farming representatives have told a Westminster Committee.

They were giving evidence on the impact of the changes announced in the October Budget, including a £1m cap on agricultural property relief in inheritance tax (IHT).

"You can't go green if you're in the red," said Richard Beattie, president of the Young Farmers' Clubs of Ulster.

"Ultimately, if farmers want to invest in the best new technologies, be more efficient on farm, there needs to be that incentive there," he said.

Mr Beattie said: "If you potentially have this huge tax bill... we have to de-invest to ensure we can keep the farm as is."

The committee was examining the specific impact of the changes on farming in Northern Ireland, given the nature of the farming sector with a high level of smaller, owner-occupied farms rather than tenancies.

The president of the Ulster Farmers' Union described the changes as "the biggest dis-incentivisation for on-farm investment" in years.

William Irvine said farmers were under "extreme pressure" to address environmental challenges but that every change and mitigation took money.

"The market needs to reflect that, or else support needs to reflect that."

The Treasury has said the new policy is based on claims data across the UK from HMRC and that about 500 claims will be affected each year.

'Figures are wrong'

But farmer and Irish Farming Journal correspondent Peter McCann told the committee that he believed that the historic APR figures used in predicting how many farms would be affected are wrong.

"For 40 years, the question was, 'is this a farm, does it qualify for 100% relief?'. It didn't really matter if the valuer valued that acre of land at £8,000 an acre or £20,000 an acre."

The Department of Agriculture, Environment and Rural Affairs (Daera) published an updated assessment of the impact of the inheritance tax changes ahead of the Committee hearing.

It said agricultural land in Northern Ireland should be valued at £21,000 an acre to cover all property on a farm.

At that value, the assessment said just under half of the 26,000 farms here would exceed the £1m threshold, including 40-45% cattle and sheep farms, and 87% dairy farms which account for a very high proportion of agricultural output.

Agriculture Minister Andrew Muir said: "The initial analysis undertaken by my department painted a worrying picture, but this deeper study has truly revealed the stark reality of how many hard-working farmers could be impacted by the inheritance tax changes.

"I stand firmly with the agriculture sector in calling for these damaging changes to be reversed. Northern Ireland will be disproportionately impacted due to the makeup of our agri-sector and it cannot continue."

The minister said he had serious concerns about the UK governments' way of measuring the impact of the tax changes.

He said he "urged" the UK government to reconsider the plans.

It comes after a meeting between Northern Ireland agricultural leaders and the Environment, Food and Rural Affairs Secretary Steve Reed in London on Monday.

William Irvine said it had been a "constructive" meeting, with an undertaking from Reed to facilitate a meeting with the Chancellor Rachel Reeves.

Representatives from the farming sector say they believe a cap of £1 million on Agricultural Property Relief (APR) will have a bigger impact in Northern Ireland.

The Department of Agriculture, Environment and Rural Affairs has warned that the larger number of sole ownership farms in Northern Ireland compared with elsewhere in the UK means there are particular concerns.

It has estimated that around a third of farms overall will be affected, but that 75% of dairy farms will be particularly badly hit.

The NIAC has said it may use some of Tuesday's session to explore how the figures being used by different groups have been reached and whether more specific data for Northern Ireland is needed.

Most farmers and agricultural land owners have previously been exempt from inheritance tax due to APR and Business Property Relief.

The chancellor announced in the Budget that from April 2026, 100% business and agricultural reliefs will be capped at the first £1 million in assets.

Reeves said the reforms "will ensure that we continue to protect small family farms, with three quarters of claims unaffected by these changes", while the National Farmers' Union has claimed that across the UK "75% of commercial family farms" will be above the £1 million threshold.

The announcement led to large-scale protests in London and Northern Ireland.