Recommendation 4

HM Government Accepted in Part

The Government understands the concerns raised by the farming community in Wales. UK Government Ministers have visited farms across the country and met with relevant organisations, including NFU Cymru and the Famers’ Union of Wales, to listen to their concerns since Autumn Budget 2024. The Government announced in December 2025 that the allowance for 100 per cent rate of relief will be increased from £1 million to £2.5 million. This means a couple will now be able to pass on up to £5 million of agricultural or business assets tax-free between them, on top of the existing allowances such as the nil-rate band. This is after listening carefully to feedback from the farming community, including those in Wales, and family businesses. The change means the Government is going further to protect more farms and businesses, while maintaining the core principle that more valuable agricultural and business assets should not receive unlimited relief. The Government has set out that the reforms are now expected to result in up to 185 estates across the UK claiming agricultural property relief, including those also claiming business property relief, paying more inheritance tax in 2026–27. This is a reduction from up 375 estates forecast to pay more at Budget 2025. Around 85 per cent of estates across the UK claiming agricultural property relief, including those that also claim for business property relief, will not pay any more tax as a result of the changes in 2026–27, based on the latest available data. HMRC data relates to estates making claims for agricultural property relief and business property relief. HMRC figures are based on inheritance tax administrative data relating to previous years, which is robust and based on observable outturn information. Claims data is the correct way to understand an inheritance tax liability, but information from claims is not recorded to enable regional or national breakdowns of the number of estates expected to be affected. Estates claiming agricultural property relief are required to provide HMRC with the value of agricultural assets, and this is used when calculating whether tax is due. Inheritance tax is currently a paper-based system and a geographical location of agricultural assets in historic claims for relief by taxpaying and non-taxpaying estates is not readily available. As part of the work to modernise HMRC, this will be digitised in the future. A tax information and impact note has been published in the normal way for UK wide changes to the tax system. This is available at https://www.gov.uk/government/publications/changes-to-agricultural-property-relief-and-business-property-relief/agricultural-property-relief-and-business-property-relief-changes. The reforms to agricultural property relief and business property relief from 6 April 2026 get the balance right between supporting farms and businesses, fixing the public finances, and funding public services. The reforms reduce the inheritance tax advantages available to owners of agricultural and business assets, but still mean those assets will be taxed at a much lower effective rate than most other assets. The Government will maintain very significant levels of relief from inheritance tax beyond what is available to others and compared to the position before 1992. Where inheritance tax is due, those liable for a charge can pay any liability on the relevant assets over 10 annual instalments, interest-free.