Rachel Reeves’ proposed changes to farm relief on inheritance tax – called the ‘tractor tax’ – could impact farmers five times as much as the Government has estimated, according to the Central Association of Agricultural Valuers (CAAV).
The Treasury said the changes will affect approximately 500 farmers each year. However, Jeremy Moody, CAAV secretary and advisor, says this figure is incorrect due to a misunderstanding of the complexities of the agricultural industry. He confirms that the new measures will actually affect about 2,500 farmers annually.
Moody’s asserts that Treasury’s analysis ignores farmers who claim only Business Property Relief (BPR) and not Agricultural Property Relief (APR). This includes individuals who own land but not the farm, those with farming partnerships, tenant farmers who do not own land or buildings, and shareholder farmers in family businesses.
“They are wrong because they are working on an incomplete picture,” Modi said. “The mistake they made was that they didn’t know what to ask and HMRC couldn’t answer them even if they did.”
It is estimated that over the course of one generation, about 75,000 farms will be affected by these changes.
Currently, farmers can claim up to 100% relief from inheritance tax on their land and buildings through APR and on operational equipment and livestock through Business Restructuring (BPR). From April 2026, only the first £1 million of their combined land and business assets will be eligible for 100% relief under the new rules. Any amount exceeding this limit will be subject to inheritance tax at an effective rate of 20% – half the standard rate of 40%.
The Government says farmers could effectively get a zero-rate tax band of £1.5m each, allowing a couple to pass on up to £3m of assets tax-free. This calculation includes personal inheritance tax allowances. However, Moody’s disagrees, stating that these limits are subjective and should not be applied to commercial assets.
“It seems to me that this is fundamentally wrong,” he commented. “If you’re throwing all that against the farm, what you’re actually doing is saying all your personal property will be taxed at 40%.”
The BBC’s fact-checking service has supported the Treasury’s estimates, and the government has made this analysis public. Sir Keir Starmer commented: “You can all check what that means in terms of impact. I think the BBC has already done that.”
A government spokesperson said: “Our commitment to our farmers is unwavering – we have committed £5 billion to the agriculture budget over two years, including more money than ever before for sustainable food production… We have been clear since announcing this change that around 500 Agricultural and commercial property relief claims will be affected each year… It is not possible to accurately deduce inheritance tax liabilities from farm net worth figures as there are different circumstances affecting each farm.
Modi criticizes government and BBC analyzes for not fully understanding the agriculture industry, leading to underestimating the impact of the policy. He stresses that many farmers, such as tenant farmers, may not benefit from some tax breaks and that the changes could significantly impact their financial situation.