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Tax experts have cast doubt on Sir Keir Starmer's claim that a “typical family” farm will get a £3m inheritance tax break.
They say the government's figure is “misleading” because it requires farmers to meet complex conditions including the possibility of farm ownership being divided upon the death of one spouse.
The Prime Minister has repeatedly used this figure when defending the controversial Budget decision to impose inheritance duty on farming assets worth more than £1m, saying earlier this month that the “threshold is £3m” in a “typical family case”. “.
Emma Healy, legal director at law firm Buddle Hatfield, said: “The £3m figure being circulated is not necessarily wrong, it is likely misleading.” “The difficulty is that there are many traps that can limit the allowance available to everyone.”
The £3 million consists of multiple components: £1 million of agricultural property assistance starting from April 2026; Exemption of £325,000 for all asset classes; And £175,000 to pass a house to children or grandchildren.
This amount amounts to £1.5 million, which the husband can transfer directly to his children. Both partners will need to pass this to get the £3m exemption.
But it means that any farms owned by a single person, unmarried couples or in a civil partnership cannot access the £3m allowance.
There are other factors that make getting the full £3m allowance difficult too.
The residential relief is reduced if either partner's share in the farm is worth more than £2 million and is wiped out by £2.35 million.
For spouses to reach the £3 million allowance, the first spouse to die must leave £1 million of their estate to someone other than their spouse to avoid the second spouse's estate exceeding £2 million.
The result is that farm ownership may have to be divided to qualify for the full exemption.
“In the event of the first death, you will have to make sure the estate passes to someone else, who will then become a joint owner with the spouse,” Boodle Hatfield's Haley said. “It gets very messy.”
Camilla Wallace, senior partner at Wedlake Bell, said £3m was “not likely to be realistic when you dig deeper” and calculated that £2.65m was the most likely amount the larger farms could claim.
The Treasury Department declined to comment. The policy, which applies to farms worth more than £1m, will only apply to around a quarter of commercial family farms, the government said. But the National Farmers Union said the real figure was three-quarters of farms.
While most of the talk about the relief has focused on farmers, the same will apply to business owners as the Budget changed the rules for Business Property Relief (BPR) in the same way as for agricultural property relief. Family farms often have to both APR their land and re-engineer processes for their livestock and machinery.
The Treasury estimated that APR changes and business restructuring would raise a total of £1.8bn by 2029-30. Calculations by consultancy CBI Economics estimate that only £387m of this figure will be from the APR.
