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Tax experts have cast doubt on Sir Keir Starmer's claim that a “typical family” farm will get £3mn of inheritance tax relief.
They say the government's figure is “misleading” because it requires farmers to meet difficult conditions including the separation of ownership of the farm when one of the partners dies.
The Prime Minister has repeatedly used the figure when defending a controversial Budget decision to impose inheritance duties on agricultural assets above £1mn, saying earlier this month there was a “£3mn limit” in the “typical family situation”.
“The £3mn figure is not necessarily wrong, it is misleading,” said Emma Haley, legal director at law firm Boodle Hatfield. “The difficulty is that there are various traps that can limit the resource that everyone has.”
The £3mn figure is made up of several things: £1mn of agricultural property relief coming in from April 2026; £325,000 exemption for all types of assets; and £175,000 to pass the house on to children or grandchildren.
This is up to £1.5mn which can be passed on by a spouse directly to their children. Both partners will need to pass this on to pay the £3mn exemption.
But this means that any single person farms or couples who are single or in a civil partnership could not access the £3mn grant.
There are other factors that make it difficult to get the full £3mn grant.
Homestead relief is reduced if the partner's share of the farm is worth more than £2mn and is canceled at £2.35mn.
For a couple to reach the £3mn allowance, the first spouse who died would have to leave £1mn of their estate to a non-spouse to prevent the second spouse's estate from exceeding £2mn.
The result is that farm ownership will probably have to be split to qualify for full assistance.
“On the first day of death you need to make sure you pass the estate on to someone else and they will own it jointly with the spouse,” says Haley at Boodle Hatfield. “It's getting worse.”
Camilla Wallace, senior partner at Wedlake Bell, said the £3mn figure was “unlikely to be true when you dig down” and reckoned £2.65mn was a possible amount for the big farms to claim.
Nondyebo declined to comment. The government said the policy, which applies to farms worth more than £1mn, would only apply to around a quarter of commercial family farms. But the National Farmers Union said the real number is three-quarters of farms.
While most of the talk about relief is aimed at farmers, the same will apply to business owners as the Budget has changed the rules for business property relief (BPR) in a similar way to agricultural property relief. Family farms often use both APR for their land and BPR for their livestock and machinery.
The Treasury has estimated that changes to APR and BPR will raise a total of £1.8bn by 2029-30. Calculations by consultants CBI Economics estimate that only £387mn of that figure could come from APR.