Reverse farm inheritance-tax changes: calculation note

Central fiscal result

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

Low case: +£0.2bn. High case: +£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: £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: +£0.6bn
• Reduced forced-sale disruption: £0.0bn
• Administration and compliance: £0.0bn
• Avoidance response: £0.0bn

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

Main source groups

• HM Treasury and HMRC, "Agricultural property relief and business property relief changes" (2026): The policy note states most claims remain below the allowance, while the largest estates account for high relief costs; anchors farm and business inheritance-tax reversals.
• HM Treasury, "Autumn Budget 2024" (2024): The Budget introduced private-school VAT, APR/BPR changes and Energy Profits Levy reforms; sets the policy baseline Conservatives propose to reverse.
• HM Revenue and Customs, "Direct effects of illustrative tax changes bulletin" (2025): HMRC provides direct-effect estimates for illustrative changes to SDLT, VAT, fuel duties and other taxes; anchors tax costs before behavioural and macro adjustments.
• Mirrlees and review team, "Tax by Design: The Mirrlees Review" (Institute for Fiscal Studies and Oxford University Press, 2011): Efficient tax systems use broad bases, coherent rates and few arbitrary reliefs; frames the efficiency trade-off when tax cuts are not matched by credible funding.
• Saez, Slemrod and Giertz, "The Elasticity of Taxable Income with Respect to Marginal Tax Rates" (Journal of Economic Literature, 2012): Higher-income taxpayers respond more strongly to tax-rate changes through avoidance, timing and real behaviour; important where the policy changes top-pay, capital or business-tax incentives.
• Conservative Party, "Our Plan for Britain" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.