Rachel Reeves’ proposed changes to agricultural inheritance tax relief – known as the ‘tractor tax’ – could affect five times more farmers than the government has estimated, according to the Central Association of Agricultural Valuers (CAAV).
The Ministry of Finance has said the changes will affect around 500 farmers every year. However, Jeremy Moody, secretary and advisor to the CAAV, says this figure is incorrect due to a misunderstanding of the complexity of the agricultural sector. He claims the new measures will affect around 2,500 farmers every year.
Moody said the Treasury Department’s analysis ignores farmers who are only claiming commercial property relief (BPR) and not agricultural property relief (APR). This includes individuals who own land but not the farm, people in agricultural partnerships, tenant farmers without ownership of land or buildings, and farmers who are shareholders in family businesses.
“They’re wrong because they’re working on an incomplete picture,” Moody said. “What they got wrong is that they didn’t know what to ask and HMRC couldn’t answer them even though they did.”
He estimates that in a generation, about 75,000 farms will be affected by the changes.
Currently, farmers can claim a 100% discount on inheritance tax for their land and buildings through APR, and through BPR for business equipment and livestock. From April 2026, under the new rules, only the first £1 million of their combined land and business assets will qualify for 100% relief. Any amount above this threshold is subject to inheritance tax at an effective rate of 20% – half the standard rate of 40%.
The government argues that farmers could be effectively zero-rated at £1.5m each, allowing a couple to pass on up to £3m of assets tax-free. This calculation includes personal tax deductions. However, Moody disputes this, stating that these thresholds are personal and should not be applied to corporate assets.
“That seems to me to be fundamentally wrong,” he noted. “If you throw all that against the farm, you’re essentially saying that all of your personal property will be taxed at 40%.”
The fact-checking service BBC Verify has backed the Treasury estimates and the government has published this analysis. Sir Keir Starmer commented: “You can all imagine what that means in terms of the impact. I think the BBC has already done it.”
A government spokesperson said: “Our commitment to our farmers is steadfast – we have allocated £5 billion to the agriculture budget over two years, including more money than ever for sustainable food production… Since announcing this change we have been clear that approximately 500 agricultural and business property exemption claims will be affected each year… It is not possible to accurately derive the inheritance tax liability from farm net asset figures as there are different circumstances that affect each farm.”
Moody criticizes government and BBC analyzes for not fully understanding the agricultural sector, leading to underestimates of the policy’s impact. He emphasizes that many farmers, such as tenant farmers, may not benefit from certain tax benefits and the changes could significantly impact their financial position.