Economists within DAERA have found that around 5% of NI farms are valued above the new £5m inheritance tax limit for married couples.

Previous analysis by DAERA found that half of NI farms, covering 80% of the farmland area, were above the original £1m agricultural and business property relief (APR/BPR) limit.

Both assessments are based on the assumption that an average figure of £21,000/acre covers the value of land, buildings, machinery and livestock on a typical NI farm.

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It means that on average farers who own more than 48 hectares (ha) are above the new £2.5m tax limit for individuals and farms over 96ha are above the £5m married couple limit.

The new analysis found that 17.5% of NI farms are over the £2.5m threshold, with this equating to 45% of all dairy farms and 14% of cattle and sheep farms.

With the £5m limit for spouses, DAERA estimate that 4.8% of NI farms are above the threshold.

This includes 11.5% of all dairy farms, 4.6% of upland cattle and sheep farms, and 2.3% of lowland dry stock farms.

Lower value

However, DAERA point out that many upland farms will have lower land values per acre, so many farms that are over 96ha will still be under the £5m limit.

Conversely, farms with pigs, poultry or horticultural enterprises have significant non-land assets and could be valued over £5m if less than 96ha of land is owned.

“Taking everything into account, it would be reasonable to estimate that around 5% of NI farms would have agricultural and business property values above the available threshold,” the DAERA analysis reads.

Individuals

Another key point is that inheritance tax bills are based on an individual person’s estate, so farms that are owned by several people will have several APR/BPR allowances.

But in their analysis, DAERA point out that the latest available figures show that 30% of NI farmers do not have a spouse, so only £2.5m of APR/BPR is available to them.

No more inheritance tax change before 2029 – UFU

It will be after the next UK general election in 2029 before any more changes to inheritance tax will happen, UFU president William Irvine has indicated.

Speaking to UFU members in Coleraine, Irvine described last month’s partial U-turn by the UK government as “a very significant a step in the right direction”.

The change sees the APR/BPR limit for inheritance tax rise from £1m to £2.5m for individuals, with £5m available for married couples.

“It is not a complete win, and our union’s position is that we want a full return to 100% APR/BPR,” Irvine said.

The UFU president pointed out the Conservatives, Liberal Democrats and Reform all recently promised to revert back to unlimited APR/BPR if they come to power.

“It should be the ambition of all four UK unions to ensure that promise is in their future Westminster election manifestos, so that we can hold them to account on that,” he said.

The next election now appears to be the focus of the inheritance tax campaign, as Irvine suggested there will be no more concessions from the current Labour government.

He explained that the farming unions had the support of around 40 Labour MPs from rural areas who were willing to abstain or vote against the proposed £1m APR/BPR limit.

Whilst the number of rebel MPs was not enough for the government to lose a vote, Irvine said it was a “significant challenge” for the government and helped secure last month’s partial U-turn.

“At this moment, it is going to be hard to get more traction on this because those 40 Labour MPs consider that they have done the job, and without them we have lost our influence on the current government,” he said.