NFU Scotland warns tax reforms risk family farms

NFU Scotland has submitted a formal response to the UK government’s consultation on the Draft Finance Bill, warning that proposed inheritance tax (IHT) reforms would have “severe and far-reaching consequences” for Scottish agriculture.

The submission, sent to HMRC this week, raises strong objections to proposed changes to agricultural property relief and business property relief, which NFU Scotland (NFUS) argues will threaten family-run farms and rural communities.

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Jonnie Hall, director of policy at NFUS, said: “The government claims its reforms are about fairness and sustainability, but the reality is quite different.

“These changes, even before implementation, are creating uncertainty and fear across our industry.

“They pose a serious threat to the continuity of family-run farm businesses and will undermine domestic food production and the future of our rural communities.”

‘Not fair or effective’

NFUS challenges the government’s claims that the proposals are fair or effectively targeted.

The union draws on findings from a recent Centre for the Analysis of Taxation (CenTax) report, which shows that more than 50% of farming businesses – including owner-occupiers and tenants – would face increased tax liabilities, compared to just 20% of non-farming landowners.

It also warns that about 70 estates annually would be unable to meet IHT liabilities.

NFUS supports the CenTax report’s alternative proposals, which it argues would raise equivalent or greater revenue while protecting genuine farming businesses.

These include a “minimum share rule”, an “upper limit on relief”, and a combined approach that could generate nearly double the revenue of the current plan.

The union also calls the proposed implementation date of April 2026 “unrealistic and damaging”.

Particular concerns are raised over the potential impacts on Scottish tenancies, food security, mental health and succession planning.

Mr Hall added: “We’re not arguing against reform – we’re arguing for smart, fair and workable reform.”

NFUS is urging the government to pause the current proposals, review the evidence, and engage with farming organisations to find a fairer solution.