5% of NI farms will still be affected by inheritance tax despite threshold rise

Around 5% of Northern Ireland farms will still be affected under a raised inheritance tax threshold, according to analysis.

Before Christmas, the Government announced it would raise the inheritance tax relief threshold for farmers from £1 million to £2.5 million in a climbdown after months of protest over the lower rate.

The reversal means spouses or civil partners will be able to pass on up to £5 million in qualifying agricultural or business assets between them before paying inheritance tax – on top of existing allowances.

Above that allowance, farmers will get 50% relief on qualifying assets and pay a reduced effective rate of up to 20%, rather than the standard 40%.

Analysis by Northern Ireland’s Department of Agriculture, Environment and Rural Affairs (Daera) projects that around one in 20 farms will still be affected under the higher threshold.

Daera Minister Andrew Muir urged the Government to completely reverse the policy announced in the 2024 budget and remove the Family Farm Tax.

In a letter seen by the Press Association, Mr Muir told the Secretary of State for Environment, Food and Rural Affairs (Defra) Emma Reynolds that further measures are needed to ensure family farms do not face large tax bills.

He said while the raised threshold has lifted a “great deal of worry for many”, some family farms will still be affected – and warned of circumstances where the death of a farmer unable to plan for the change could leave the farm unviable due to a massive inheritance tax bill.

In December 2024, Daera analysis found that half of farms in Northern Ireland – equating to 80% of total farmed land – would be affected by the lower threshold.

Using the same methodology for analysis of the revised threshold and accounting of transferable allowances between spouses, the department now puts that figure at approximately 5%.

In his letter to Ms Reynolds, Mr Muir called for “careful consideration” of his request to keep the threshold for agricultural and business property relief under review, as he said there are reports of land selling at more than £25,000 per acre in Northern Ireland.

If prices continue to rise, a growing proportion of farms could become liable for inheritance tax over time, with thresholds frozen until April 2031.