NFU Cymru says it fears tax changes revealed during yesterday’s Budget announcement will cause lasting damage to Welsh farming.
The union has expressed fears for the future of the family farm following the upcoming changes to Agricultural Property Relief (APR) and Business Property Relief (BPR).
It was announced yesterday that BPR and APR will be subject to a £1 million combined cap of 100 per cent relief; values in excess of this amount will only benefit from 50 per cent relief from April 2026.
Chancellor, Rachel Reeves claimed that the £1 million 100 per cent band would help protect small farms.
But farmers say the threshold is unlikely to be enough to protect even the smallest of farms. This means that the majority of farmers can now expect to be subject to inheritance tax (IHT) on their deaths.
NFU Cymru President Aled Jones said: “The changes announced today are not only a threat to our family farm structure and our tenanted sector but also to our nation’s food security. The sort of restructuring we are likely to see in response to these changes is likely to mean there will be less land available for tenancies and contracts, the lifeblood of small family farm businesses and a critical point of entry for young and first-time farmers.
“NFU Cymru has written to the Chancellor twice and all Welsh MPs on this issue. In addition, the union and its members have raised this extensively when we have met with politicians at party conferences as well as in their constituencies. Despite all of these efforts, the Budget confirms the UK Government’s intention to reform these reliefs and that will come as very disturbing news to farming families the length and breadth of Wales. This also goes against the previous assurance given by the Defra Secretary of State that the Labour Party had no plans to change Inheritance Tax, including APR.”
The union leader said the tax plans for agricultural property and businesses were “misguided” and said they would harm family farms, rural communities and their ability to produce affordable food for the nation.
“The changes will see agricultural assets over £1 million attract an inheritance tax at a rate of 20 per cent from April 2026, something which will bring the majority of Wales’ family farms into the scope of this tax,” said Mr Jones.
“Just because a family farm may look like a valuable asset on paper, that doesn’t mean those who work it are wealthy and able to meet a large tax bill.”
“Whilst there is typically a lot of capital involved in farm businesses, the return on the capital employed in farming, after taking into account a wage for the farmer, averages less than 1 per cent. Such a rate of return is completely insufficient to pay an inheritance tax charge of 20 per cent upon the generational transfer of that farm. Unless we see an urgent reconsideration by the UK Government, I am afraid we are going to see the breakup of multi-generational family farms.”