Farmers are angry. For many months now, protests and gatherings have highlighted the challenges faced by those who worked the land – higher costs, declining incomes, proposed land management rules from the Senedd that mean less productive ground to try and make a living. And all of this followed the effects of Brexit, where the agricultural community was hard hit by new trading rules and a loss of support from Brussels and the European Union.

Just when it seemed things couldn’t get worse, it did. Enter a new Labour Government at Westminster last summer facing a £22 billion black hole in public finances,. By October’s budget, Chancellor Rachel Reeves The flashpoint is the government’s decision in its budget last month to scrap a tax break dating from the 1990s that exempts agricultural property from inheritance tax. From April 2026, farms worth more than £1 million pounds face a 20 per cent tax when the owner dies and they are passed on to the next generation.

As it stands, farms are almost entirely exempt from inheritance tax – thanks to two policies called Agricultural Property Relief (APR) and Business Property Relief (BPR). Farm owners have been able to use a combination of these reliefs to pass on their farmland and associated business assets, tax free. The Chancellor plans to combine the reliefs together under the £1 million cap.

According to figures from the Department for Environment, Food and Rural Affairs (Defra), the average farm in England is worth £2.2 million. The Treasury says that about a quarter of farms will be affected by the changes – about 500 in a single year out of some 200,000 across the UK.

The Treasury estimate comes from real-world data on how many farms claimed Agricultural Property Relief on inheritance tax in previous years, and how many of those would now be over the threshold to pay tax.

Farmer groups have said this could be an underestimate as it doesn’t take account of diversified farms – those are farm estates which also run other kinds of businesses like ben and breakfasts alongside their farming activity.

These farm estates also use Business Property Relief to reduce their tax burden, which is now also subject to the £1 million cap – and farming groups say when the value of business assets are added in, this would bring more people over the threshold to pay.

The Prime Minister had previously insisted a "vast majority" of farmers will not be affected by the changes, with the Treasury previously claiming it expects around 500 estates across the UK to be affected by the changes each year.

Now, however, those assurances about low number being affect seem to be wholly misleading.

Research presented to the Senedd earlier in February by by Jeremy Moody from the Central Association of Agricultural Valuers (CAAV), questions the UK Government’s figures regarding the Chancellor’s plans to reduce the benefit of Agricultural Property Relief (APR) and Business Property Relief (BPR) from Inheritance Tax.

Simply put, farm more Welsh farms face huge inheritance tax bills than previously suggested by the Government.

In Wales alone, about 200 farms will face the tax – a far cry from the 500 suggested by the Government for all of the UK.

On Tuesday, 19 February, the UK Treasury met with the Farmers' Union of Wales (FUW) President, Ian Rickman, alongside other UK farming unions to discuss changes to Inheritance Tax.

It didn’t go well.

“We are deeply disappointed by the Treasury's dismissive response to our compelling case against the detrimental impact of the Inheritance Tax changes for Welsh family farms,” Mr Rickman said.

“Together with other UK farming unions, we clearly outlined the potential economic, emotional and cultural devastation these changes could inflict on farms and rural communities across Wales, and our domestic food production. Crucially, we offered our willingness to collaborate with the government and industry stakeholders to address the flaws in this ill-thought-out policy.

“Regrettably, it seems these arguments have fallen on deaf ears. Serious questions remain about the Treasury's own figures and given steep trajectories in land prices and the current and historically low farm profits for the farm types which predominate in Wales, such inheritance tax bills would be unaffordable for a significant proportion of family farms. We continue to hold grave concerns about these changes, and will liaise further with our membership regarding the best way forward.”

The CAAV research says that as a “reasonable estimation”, 200 taxpayers a year in Wales will now pay tax on the value of their farming businesses - with as many as 6,000 taxpayers over a generation.

Mr Rickman said: “From the start, the FUW has questioned the Treasury’s figures surrounding changes to the inheritance tax, and these findings again confirm a significant proportion of Welsh farmers responsible for Welsh food production and agricultural activity will be adversely affected by the changes to APR.

“Given the current and historically low farm profits for the farm types which predominate in Wales, and significant downward pressure on farm incomes due to regulation and changes in support policies, it would appear that in many or most cases such inheritance tax bills would be unaffordable, even when divided over a ten year period, necessitating the sale of large areas of farmland. The subsequent impact on food production, the rural economy, and communities would therefore be far-reaching.

“This correspondence again confirms the desperate need for the UK Government to undertake Wales-specific analysis into the possible impact of these changes, with expectation this will allow the UK Government to recognise and review the far-reaching implications of this ill-thought out policy for Welsh farmers.”

Jeremy Moody, the Secretary and Adviser for CAAV said his organisation that 75,000 farming taxpayers across the UK could have a tax liability in respect of their farms under the changes when considered over a generation ‑ some 2,500 each year – following the October budget. Since then , CAAV broke down the numbers of farming taxpayers in Wales who could be expected to pay Inheritance Tax on their farms as result of that change.

“Only very limited information that is directly relevant to forming such a view is available. However, the broad conclusion is that, each year, some 200 Welsh farming taxpayers will have an Inheritance Tax liability arising from the reduced benefit of APR and BPR. That would be 6,000 affected Welsh farming taxpayers over a 30 year generation, before considering the effects of inflation should the full relief band not be properly indexed as other Inheritance Tax thresholds have been frozen,” Moody wrote.

While the Treasury has given the estimate of a total across the whole UK for the first year, 2026/27, of 520 affected taxpayers, the Office for Budget Responsibility has now twice described that as having a high level of uncertainty and advised that it might take 20 years for patterns to settle down with changing taxpayer behaviour. The assessment of this paper suggests that Wales would, on its own, produce 40 per cent of that UK total, adding to the view that the official estimate of the number of those affected substantially underestimates that number. That is seen to be principally because the figures used for the Treasury do not take account of large number of farming claims made solely under BPR and also that the change is expected to create new claims that would previously have been exempt transfers between spouses, the CAAV paper says.

While there is much discussion of the overall value of farm businesses, Inheritance Tax is a tax on the net market value - after liabilities - of what is owned by individual taxpayers as at death together with the value of gifts they have made in the seven years previous.

If that value is £4 million and if owned by one individual, that would be £4 million; if owned in equal shares by two individuals, such as a married couple, then each would be taxed on £2 million. And CAAV says that if one owned £3 million and two others £500,000 each, each would be taxed on that basis.

While Wales has some 24,500 recognised holdings according to Senned data, a large number are classed as “very small” requiring less than 1 full-time equivalent of labour. Only some of these would have assets above £1 millon. Such farms may typically have little debt. Relatively few are likely to a significant liability under the changes. As an assessment based on labour requirements, this will not include the small but more valuable and more capitalised units, such as for some horticultural, pig, poultry and equivalent enterprises.

CAAV says there are some 9,983 small, medium and large farms, made up of 1,469 dairy farms – business likely to have substantial operational farming assets including their herds but also some debt, 6,287 cattle and sheep farms including a wide variety of operations and scale, and 1,176 with lowland grazing – again with a mix of operations. It also counts 551 arable and horticultural farms with the element of potatoes and other enterprises in this and the expected larger scale of operation, many of these will be over £1m but have some debt - and, say, 550 mixed farms.

In a very broadbrush approach, taking the great majority of the dairy farms (say, 1,250), half the livestock farms (3,150), a third of the lowland grazing farms (400), two thirds of the arable and horticultural farms including potato farms (370) and half the mixed farms (275) as having a value over £1 million gives 5,445 farms. That is likely to be an underestimate but, as a cross check, the 2018 consultation paper, Brexit and Our Land, advised that 3,300 farms had a turnover (not profit) above £125,000, as a possible indication of scale, CAAV says in estimating the number of farming taxpayers affected in Wales.

A second approach works from the Senedd paper reporting that Agriculture in the UK 2021 recorded for the area of agricultural land alone that 14 per cent of Welsh farms (say, 3,450 farms) had between 125 and 250 acres (50 to 100 ha) – all worth over £1m except where the smallest have land worth less than £8,000/acre. Another, 3,450 farms had more than above 250 acres (100 ha) - all worth over £1 million unless land is worth less than £4,000/acre. At £8,000 an acre all are worth more than £2 million before considering operational assets.

CAAV took into account other factors such as the number of tenanted farms or those with other non-agricultural commercial operations into its calculations.

Based on everything. Mr Moody told the Senedd: “It seems a reasonable estimate for the reductions in relief to bring 200 taxpayers a year in Wales into tax on the value of their farming businesses, 6,000 over a generation.

“That assessment is before considering the effect of inflation should the £1 million band be frozen rather than indexed for inflation” he cautioned.

Responding to the report, Chair of the Welsh Affairs Committee Ruth Jones MP said: “This is an important issue for the many taxpayers across Wales who rely on farming and the farming supply chain for their livelihoods. We must ensure that any changes to tax are proportionate and do not leave some out in the cold.

“However, the varying claims over data prove that this is a moving picture. We must take a broader view: how can we secure a sustainable future for Welsh farmers?”

For farmers across Wales, that’s a question they desperately need answered. Sooner, not later.