Farming leaders in Suffolk warn inheritance tax changes will affect all family businesses
From this week, agricultural and business assets above 2.5 million pounds may face inheritance tax when passed on.
Farming leaders have warned that changes to inheritance tax rules could affect the future of some farms and family-run businesses in Suffolk.
From April, reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) mean some assets above £2.5 million may now be subject to inheritance tax when passed on.
Country Land and Business Association (CLA) regional director Cath Crowther said the changes could have significant consequences for businesses where wealth is tied up in land, machinery and livestock.
“Farmers often look wealthy on paper, but that value is tied up in the assets required to operate those businesses,” she said.
She added that, in some cases, families may need to sell assets to meet tax liabilities.
“The assets would need to be sold to pay this tax, which often means that the business can’t continue,” Ms Crowther said.
However, she stressed that this was a concern raised by the sector, rather than a certainty in every case.
Concerns over investment and rural economy
The CLA said uncertainty around the changes is already influencing business decisions.
“We’re seeing farms and wider family businesses withdrawing investment because they don’t have the certainty,” Ms Crowther said.
She suggested this could affect decisions such as purchasing new machinery or diversifying into ventures like farm shops, which may increase the value of a business.
The organisation argues the changes could have wider implications for rural economies, although this has not been independently verified.
Challenges around valuing assets
Ms Crowther also raised concerns about how assets will be valued.
She said calculating the value of farms and businesses could be complex, as it may involve assessing land, equipment, livestock and even crops that have not yet been harvested.
“Every individual business is completely different,” she said. “All of those individual items have a value and someone has to go and value those in order to work out what the tax payable is.”
Impact on succession planning
The CLA said the changes could create additional pressure for families planning to pass businesses on to the next generation.
Ms Crowther said this could be particularly difficult for older or unwell farmers who may have limited time to make financial arrangements.
She added that some businesses are already exploring options such as insurance or financial planning to prepare for potential future tax liabilities.
Government position
A spokesperson from the Department for Environment, Food & Rural Affairs said:
“We’re backing British farmers as part of a new era of partnership to create a productive, profitable and sustainable future for farming.
“We’ve listened to farmers and business owners across the country and have made changes to inheritance tax relief to protect more family farms.
“This is alongside delivering the largest nature-friendly farming budget in history, protecting farmers in trade deals, and making supply chains fairer to help secure the farming sector’s future and boost profitability.”
Background:
• We’ve increased the individual threshold from £1 million to £2.5 million.
• Couples with estates of up to £5m will now pay no inheritance tax on their estates. The allowance will be transferable between spouses and civil partners.
• It will also apply to widowers who have lost spouses or civil partners before the policy is introduced.
• This will halve the number of estates claiming Agricultural Property Relief (including those also claiming Business Property Relief) affected by the reforms, better targeting the relief.