Farm View: A changing landscape for land

In both territories, relief from inheritance tax has long been relied on to safeguard farms from having to be sold on death in order to meet inheritance tax bills and, therefore, to allow inter-generational farming security.

Finance Minister Jack Chambers said he was adjusting the relief for Irish farmers because wealthy individuals were reducing their inheritance tax by buying up agricultural land.

However, unintended consequences emerged when the Finance Bill revealed that the amendments to Agricultural Property Relief could have profound implications for many farming families.

Marty Murphy, Head of Tax at ifac, warned the changes were likely to negatively impact many farming families and arrangements that rely on agricultural relief for the seamless transfer of farmland from one generation to the next.

He listed 15 real-life scenarios to highlight how the amendments could dramatically alter the landscape of farm inheritance and impose significant tax liabilities on farming families.

So there was understandable relief among farmers, when a delay to changes to agricultural relief was revealed by Taoiseach Simon Harris at the recent IFA Farming and Food Conference. He said the delay will allow further consultation on the changes.

He said: “We heard from the IFA and others on concerns they’ve had on some of the changes in the Finance Bill regarding Capital Acquisitions Tax and agricultural relief."

He said it won’t come into effect until there is proper consultation and engagement with stakeholders. “We’re endeavouring to make changes that are sensible, changes in terms of those who aren’t farmers and those who shouldn’t be able to benefit from reliefs, and should pay their way in that regard.

“But there clearly can’t be unintended consequences. The intent is solid, but rushing its implementation would be really foolhardy”.

The government will be very keen to avoid any unintended consequences after a surplus of 7.5% of national income allowed it to present a budget with €10.5bn of tax cuts for voters, plus spending increases.

This could hardly have been more different from the situation facing UK Chancellor Rachel Reeves, with Labour’s first Budget in 14 years having to plug a £22bn “black hole” in the nation’s finances, while encouraging economic growth.

So it was no surprise that Business Property Relief (BPR) and Agricultural Property Relief (APR), which provide 100% relief from inheritance tax, were adjusted, even though these are needed to prevent the adverse effect on businesses of inheritance tax at 40%.

From April 6, 2026, individuals will only qualify for 100% BPR or APR up to a combined limit (for both reliefs) of £1m. Any value over and above the £1m cap will qualify for relief at a lower rate of 50%.

Therefore, if an individual dies with agricultural property worth £3m and business property worth £2m, £600,000 of the value of the agricultural property will be relieved at 100% and £400,000 of the business property.

For example, a mother and son farm in partnership, with £20m of agriculture, woodlands, some commercial properties, and some let properties, of which £10m forms part of the mother's estate.

Under the current rules, there would be 100% relief from inheritance tax on the mother's death; the £10m would be inherited free of the tax.

Under the new rules, the first £1m of her partnership interest will benefit from 100% relief. The remaining £9m will only benefit from 50% relief, so a value of £4.5m will be chargeable at 40%, leaving a £1.8m liability.

The Chancellor claimed that the £1m 100% band would help protect small farms. However, £1m is likely to be insufficiently generous for even the smallest of farms, meaning that practically all UK farmers can now expect to be subject to inheritance tax upon their deaths.

It is expected there will be a rush in the UK before April 2026 to put assets into trust or to make lifetime gifts in order to benefit from the current, much more generous levels of relief.

However, such options will be severely limited for farmers financially dependent on their agricultural assets (in order for gifts to be effective for inheritance tax purposes, the donor cannot benefit further from them).

Therefore, it is feared that the tax changes will lead to the break-up of many farms because the low-yield and high-capital nature of farming prevents the building of reserves that meet inheritance charges.