Consequences on family farms of inheritance tax​

On October 30 last year, the new budget was announced. It contained legislation that roused many. As of April 2026 farms will pay inheritance tax. This means inherited agricultural assets worth over £1 million will be taxed 20 per cent.

The number of farms this will affect is unclear. The Treasury claims that around 500 estates will be affected each year, yet the Country Land and Business Association estimates the legislation may harm 70,000 farms.

Inheritance tax is not a new thing. Many other businesses already pay it. It is forecast to provide the government with £7.5 billion in the tax year leading up to 2025. This might appear to be a substantial amount but it is relatively small when compared to other sources of tax such as income tax, which is estimated to raise £302.7 billion in the same period.

The government clearly thinks the good they can do with this money outweighs the negative impact on farms. Is this fair? To learn more about the extent of the consequences of this legislation I spoke to Scottish Borders farmer, Anthony Barlow.

Anthony’s 650 acre farm in is a mixed farm with sheep, cattle and cereals. It has been in his family for many years and he hopes that it remains with them for the many years ahead.

Anthony calculated that the new inheritance tax alone would take the family 50 years to pay off. This is aside from all the other costs they encounter, such as the increase in National Insurance and necessary rises in workers wages in line with the National Living Wage.

While most other farming families would have to rely solely on what profit does come from their farm, Anthony is able to set aside this money as he has income from other businesses.

However, he does not think these businesses should be taxed. In his opinion, inheritance tax should only apply to people’s homes, cars and wealth.

“No business, if it's paying so much money, can afford to invest in research and development or its market, explained Anthony. “So, you are removing from a small business one of the tools it has; to invest.

“As a business owner in the private sector, we are generating wealth that funds the nation. Without private business there is no money to put into the public sector. If we stop investing, if we stop taking the risks, there will be no money to put into centralised services.

“I think the bit where agriculture stands out is this massive triangle of dependency on farming in the local community.”

Anthony highlighted that this does not only include farm workers and farm-related companies, but a wealth of other businesses. Farms are critical to the rural economy and, as Barlow goes on to explain, equally critical to UK food security.

“Farming is producing food for the nation and for further afield,” he said. “And as the availability of farmland decreases we are going to see less and less areas of the world that are suitable for agricultural purposes.”

For the UK, we have, of course, already seen the consequences of low resilience in terms of UK energy security following costly supply instabilities due to the Russia-Ukraine war. Our farmers give us food security that we need for a resilient future, which begs the question: has the government undervalued its importance?

Anthony believes that family farms may stop working when put under the financial stress caused by this inheritance tax, and big investment companies would buy up the land that becomes available.

“These companies will, at best, be London-based, so the money will then go back into London, but more likely they will be internationally based,” he said.

This would mean money going to other parts of the world and the wealth built into that farming triangle will disappear.

“These companies are not going to be interested in farming the land to generate food because the profitability for them isn't there,” said Anthony. “Farming is probably one of the least efficient investment opportunities when you are looking at pure farming.”

In Anthony’s opinion, this is why there is such a massive imbalance between asset value and the income made from the asset in farming.

“Investment companies are starting to buy up land purely from a monetary gain perspective. I think that is very concerning because it doesn't have the same value attached to the community [as family run farms].

“Family run farms have traditionally been what has made up the UK. And, because they are family farms, they have a much longer term view than someone who is just purely going into farming from an investment perspective.”

This long term view may now need to change. It is clear that, with this new legislation being brought in, farmers will have to reconsider their plans for the future of their farms and when it is best to hand over their asset. As you can’t predict when someone will die, farms risk passing over their asset and paying inheritance tax twice.

“Inheritance tax is an extremely difficult thing to position from a management perspective and that's one of the reasons why it will have such a massive impact on family farming as we know it today,” said Anthony.

Some may argue that farms are a low income producing, yet attractive, business asset, and if they have to pay more or sell their land, not much harm is done. Yet it must be recognised that while they may not generate high income, they deliver hugely for the rural economy, steward our countryside for the better, and ensure UK food security.

What this legislation has highlighted is Britain's starkly polarised views on the value of the countryside and where farming stands next to other land uses.

As it stands, from April 2026, farms will pay inheritance tax. If farmers cannot cope with this tax it seems there will be consequences.

Consequences that would undoubtedly be felt here in the Scottish Borders.