Impact of inheritance tax changes on Scottish farming families

Scottish farmers face new challenges as inheritance tax reforms threaten family farms.

The recent Autumn Budget has stirred significant concern among Scottish farmers, particularly regarding the changes to the inheritance tax regime. With the announcement of reforms to agricultural and business property reliefs, many in the farming community fear the long-term consequences for family-run farms. Starting April 6, 2026, estates valued over £1 million will face a 20% inheritance tax on the amount exceeding this threshold, a move that could jeopardize the future of many family farms.

Understanding the new inheritance tax landscape

The reforms introduced by Chancellor Rachel Reeves have raised alarms across the agricultural sector. Farmers are particularly worried about the implications of the new tax structure, which will impose a significant financial burden on estates valued above £1 million. For instance, a farm worth £5 million could incur a tax liability of at least £800,000 when passed down to the next generation. This change is expected to create a ripple effect, potentially leading to the fragmentation of family farms as heirs may be forced to sell parts of the estate to cover tax obligations.

Concerns from industry leaders

Industry representatives, including Tim Eagle, the Scottish Conservatives’ rural affairs spokesman, have voiced their concerns about the impact of these changes. Eagle highlighted that most viable modern farms are valued well above the £1 million mark, making them particularly vulnerable to the new tax. He warned that the financial strain could lead to family units being split apart, raising the question of whether this marks the beginning of the end for family farms in Scotland.

Future planning and professional advice

Legal experts, such as JP Campbell from Ledingham Chalmers, have emphasized the importance of succession planning in light of these changes. Farmers are encouraged to seek professional advice to navigate the complexities of the new inheritance tax landscape. With pensions also set to be included in the taxable estate from April 2027, farmers must consider the full scope of their assets when planning for the future. The Agriculture and Horticulture Development Board (AHDB) has noted that these changes may prompt farmers to rethink their succession strategies earlier than anticipated, as the financial implications become clearer.

Industry response and calls for action

The National Farmers’ Union (NFU) has been vocal in its opposition to the inheritance tax reforms, labeling them a “hammer blow” to farming families. NFU president Tom Bradshaw has criticized the government for its lack of understanding of the farming sector and has called for a reversal of the changes. As farmers grapple with rising costs and economic uncertainty, the NFU warns that these tax reforms could further exacerbate the financial pressures on the agricultural community, potentially leading to increased food prices for consumers.

In summary, the recent changes to inheritance tax are set to have profound implications for Scottish farmers and their families. As the farming community navigates this new landscape, the importance of strategic planning and professional guidance cannot be overstated. The future of family farms hangs in the balance, and the call for government intervention is growing louder.