The government’s claim that family farms will benefit from a £3m tax exemption has been questioned by tax experts.

Prime Minister Sir Keir Starmer has argued in defence of Chancellor Rachel Reeves’ move in the Budget to charge inheritance tax (IHT) on agricultural land worth above £1m.

He said earlier this month that in a “typical case” farmers would receive an exemption of “£3m before any inheritance tax will be payable”.

But the decision prompted widespread fury from farmers who fear increasing IHT could mean they are forced to sell up land which may have been farmed for generations.

Now several tax experts have queried the Prime Minister’s claim, suggesting to the Financial Times (FT) that Starmers’s £3m exemption may be “misleading” and not “realistic”, as in order to receive the full amount farmers would have to abide by complicated requirements.

Emma Haley, legal director at law firm Boodle Hatfield, told the newspaper: “It’s not necessarily that the £3mn figure that’s been bandied about is wrong, it’s more misleading.

“The difficulty is there are various traps that can limit the allowance that everyone has.”

Tax relief queries

While Camilla Wallace, senior partner at Wedlake Bell, told the FT the £3m figure was “not likely to be realistic when you drill down”, and suggested £2.65m was a better farm tax relief estimate.

The £3m exemption would be reached by combining £1m of agricultural property relief (APR) post-April 2026, in addition to a £325,000 assets exemption and a £175,000 exemption for passing down a home to descendants.

Adding up to £1.5m, the total exemption would need to be applied to both partners in a married couple in order to qualify for the full £3m, meaning farms owned by a single person or an unmarried or un-civil partnered couple would not benefit.