What other options are there besides inheritance tax reform that "largely protects family farms"?

According to a separate analysis of the government's inheritance tax reforms, eight out of ten farming estates will be able to pay their IHT bill without having to liquidate their farm

According to new research, most farming estates will be able to pay any inheritance tax bill without having to sell off portions of the farm, so inheritance tax (IHT) reforms may not be as detrimental to family farms as initially believed.

Campaigners claim that changes to the inheritance tax that will affect business and agricultural property reliefs in April of next year, including a 20 percent inheritance tax on assets valued at more than £1 million, will devastate farming communities.

However, a study by the Centre for the Analysis of Taxation (CenTax), which conducts independent academic research on tax policy, found that up to eight out of ten farm estates will be able to raise the funds they require for any potential IHT bill by selling off non-farm assets alone.

Dr. Andy Summers, director of CenTax and associate professor at the London School of Economics & Political Science (LSE), stated: "Our analysis demonstrates that the government's reform limits claims by the wealthiest estates while largely protecting family farms.

We examine common IHT myths and strategies to lower your IHT bill in different articles.

Impact of inheritance tax reforms.

The study calculates that approximately 86% of affected farm estates could cover their whole IHT bill with non-farm assets using comprehensive HMRC inheritance tax data.

Every year, about 70 farm estates are left unable to do so. The study found that, if paid in ten-year annual installments, about 40 farm estates would have a residual bill that exceeds 20% of their income (after taxes and depreciation).

Overall, the report projects that the inheritance tax reforms would affect 30% of farm estates between 480 and 600 annually. Family farms worth less than £5 million may make up about 200 of these estates annually.

The majority of the tax burden will fall on larger farming estates, according to the study. One third (34 percent) of the affected estates with values over £5 million will account for the majority (80%) of the inheritance tax revenues as a result of the government's reforms.

According to the report, one in ten (11 percent) affected farm estates worth less than £2 million are expected to pay less than 1 percent of the additional tax.

A tax increase of less than five percentage points (pp) would be experienced by nearly half (49 percent) of all affected farm estates. Every year, 25 farm estates with a value of more than 7.5 million are subject to an increase of more than 15 percent.

The subject of the analysis is farm estates. A farm is not the same as a farm estate. It refers to the entire net worth of a deceased person who claimed relief for farmland or other farm assets.

This definition covers both farmland investors and working farmers, including tenant farmers. A farm may be divided among several farm estates, or a farm estate may be the owner of several farms.

Different approaches to inheritance tax reform.

The study found that working farmers, who make up 42% of affected farm estates but 64% of all farm estates, are more likely to be affected by the reform than landowners. While they make up 37% of affected farm estates, owner-farmers only make up 17% of all farm estates.

The authors of the report proposed a minimum share rule in order to more effectively target the inheritance tax reform while still generating at least as much revenue overall.

A 100% extension of relief for farmers and other business owners to 5 million per estate would be funded by this removal of relief for passive investors in farmland and other business assets.

As an alternative, an upper limit on relief might be imposed, capping relief at the first 10 million of the claim. This would finance an increase in the allowance for 100% relief to 2 million per estate.

In order to decrease its use for tax planning and increase protection for businesses, including farms, Summers suggested that the relief be more precisely targeted.

"We designed these upcoming reforms so they address stark unfairness in the distribution of reliefs, while ensuring that the few estates facing higher bills can in a manageable way pay them," a government spokesperson stated. This report backs that up.

The former president of the NFU, Baroness Minette Batters, has been appointed to advise on reforms to increase farmers' profits, and we are also investing billions of pounds in nature's recovery and sustainable food production.