PolicyLens

Methodology note

Reverse farm inheritance-tax changes: calculation note

Scenario assumptions behind the Reverse farm inheritance-tax changes estimate. The figures are illustrative and exclude unrelated Conservative pledges.

View main policy page: Reverse farm inheritance-tax changes

Central fiscal result

+GBP 0.6bn - Net fiscal impact in 2028-29

Low case: +GBP 0.2bn. High case: +GBP 1.2bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

  • Model reversal of APR restrictions by 2028-29.
  • Central cost assumes most current reform revenue is lost.
  • Baseline is the post-2026 APR allowance regime.
  • Business property relief is modelled separately.

Affected population

  • Affected population is estates claiming agricultural property relief.
  • Direct beneficiaries are heirs of qualifying farm assets.
  • Indirect exposure includes land markets and tenant farmers.
  • Most small claims are already below the allowance.

Gross impact

  • Central cost: GBP 0.6bn annual lost IHT revenue.
  • Low case assumes tight active-farmer eligibility.
  • High case assumes wider planning and land-price effects.
  • No food-supply GDP benefit is scored.

Fiscal build-up, central case

  • Lost inheritance-tax receipts: +GBP 0.6bn
  • Reduced forced-sale disruption: GBP 0.0bn
  • Administration and compliance: GBP 0.0bn
  • Avoidance response: GBP 0.0bn

Central net impact: +GBP 0.6bn in 2028-29.

Behaviour and pass-through

  • Low case assumes only active farms benefit.
  • Central case assumes most relief restriction is reversed.
  • High case assumes expanded estate planning increases claims.
  • Land-price effects benefit owners but not workers.
  • No broad productivity effect is assumed.

Phasing

  • 2026-27: +GBP 0.1bn. Preparation or partial implementation.
  • 2027-28: +GBP 0.5bn. Main ramp-up year.
  • 2028-29: +GBP 0.6bn. Target-year central estimate.
  • 2029-30: +GBP 0.6bn. Continuation at steady-state assumptions.

Main source groups

  • con-plan-2026: Conservative live policy page; used to identify current pledge wording.
  • apr-bpr-2026: APR/BPR policy note; inheritance-tax relief distribution and revenue baseline.
  • autumn-budget-2024: Autumn Budget baseline for tax measures Conservatives would reverse.
  • hmrc-ready-2025: HMRC tax ready reckoners; main tax-cost anchor.
  • mirrlees-2011: Tax design principles; informs behavioural and incidence assumptions.
  • saez-slemrod-giertz-2012: Taxable-income responses; informs behavioural and incidence assumptions.