Cost of Agricultural Relief in Inheritance Tax has doubled over the past five years to reach £700 million 5 December 2024 Agricultural Relief for Inheritance Tax (IHT) is estimated to cost the Exchequer £700 million this year (2024-25), delivering savings of more than £300,000 each to the approximately 1,700 estates who claim it (based on the latest available data in 2021-22), and demonstrating why the Government is right to scale it back, the Resolution Foundation said today (Thursday) in response to the latest tax relief statistics published today by HMRC. The Foundation notes that the cost of this tax break has increased significantly in recent years, having cost the Government £320 million in 2019-20. Its analysis shows that the policy – which is set to be scaled back from April 2026 following measured announced in the Autumn Budget – has saved claimants an average of £300,000 each between 2019 and 2021. Combined with the cost of Business Relief this year (£1.1 billion), these two Inheritance Tax breaks will cost the Treasury £1.8 billion. In comparison, the Foundation notes that the upcoming changes announced in the Autumn Budget are projected to raise around £500 million a year, with significant tax breaks still left in place for agricultural and business assets when compared to other estates. Even under the revised policy, owners of agricultural or business assets will still often be able to pass on £3 million of wealth entirely tax-free. The Foundation notes that £3 million would have put a household in the top 2 per cent of wealthiest households, pre-pandemic, while owning assets of £3.7 million would put a household in the top 1 per cent. The sizeable price tag of these Inheritance Tax breaks demonstrates that the Government is correct to question their cost-effectiveness at a time of extremely strained public finances, says the Foundation. Adam Corlett, Principal Economist at the Resolution Foundation, said: “The latest HMRC data shows just how expensive Agricultural Relief within Inheritance Tax is. The cost of the tax break is growing too – reaching £700 million this year, around twice as much as it cost five years ago. “At a time of strained public finances when we need to invest in public services, the Government is correct to question the value for money of a tax relief gamed by the super-wealthy. “Even with the upcoming reforms, these estates will often still be able to pass on £3 million of assets tax free. This will still be preferential treatment compared with other households, but the new system will raise meaningful revenue while improving fairness between taxpayers.”
