Why We Should Scrap Inheritance Tax for Good
Market View | 24 December 2025
The case for abolishing UK inheritance tax isn’t political posturing — it’s an economic imperative for British farming, food production and supply resilience.
Inheritance tax contributes barely 1% of government revenue, yet it punches well above its weight in economic damage. Nowhere is this more visible than in asset-heavy, cash-light businesses: farms, abattoirs, cold stores and family food enterprises. In the livestock sector, where land, buildings and fixed capital dominate balance sheets, IHT has become a structural barrier to investment, succession and long-term planning.
The £2.5 Million Problem
Recent reforms capping Agricultural Property Relief (APR) and Business Property Relief (BPR) at £2.5 million were sold as a compromise. In practice, they’ve reintroduced the very uncertainty these reliefs were designed to remove. Many working livestock farms now breach that threshold on asset value alone — not through profitability, but because land prices have detached from agricultural returns. The result: tax exposure based on illiquid balance sheets, not trading performance.
This matters because IHT doesn’t operate in a vacuum. UK cattle and sheep numbers are already falling. Input costs are rising. Regulatory burden is tightening. Against this backdrop, inheritance tax forces rational but damaging decisions: delay expansion, reduce stock, sell land, or exit the sector entirely. The long-term impact feeds straight into lower domestic supply and higher import dependency — trends already entrenched in beef, lamb and poultry.
Reliefs Aren’t a Fix
Supporters argue reliefs can be refined. But reliefs aren’t a solution to a fundamentally flawed tax — they’re a patch on a leaking system. Caps, conditions and complexity only shift risk elsewhere, inflating legal costs and discouraging the long-term planning that farming requires. Banks and investors already price IHT exposure into lending decisions, meaning economic damage occurs long before any tax bill arrives.
The UK is drifting out of step internationally. Many comparable economies have abolished inheritance taxes outright, or shifted taxation to the point where liquidity exists — at asset sale, not succession. Taxing death rather than economic activity is an increasingly isolated position, and an indefensible one in productive sectors.
The Market Consequence
From a market perspective, the logic is stark. If the UK wants a resilient domestic food system capable of meeting demand without excessive import reliance, it cannot continue penalising the businesses that underpin it. Scrapping inheritance tax — or at minimum, removing it entirely from productive assets — would signal that long-term investment, continuity and domestic supply actually matter.
This isn’t about protecting wealth. It’s about recognising that farms and food businesses are productive infrastructure, not speculative holdings. Taxing them at succession weakens supply chains, accelerates consolidation and shifts production offshore.
If policymakers are serious about food security and keeping production in the UK, inheritance tax reform must go further. The most coherent option remains the simplest: abolish IHT and tax capital gains when assets are realised, not when families are trying to keep businesses operational.
Tax value when it’s liquid. Not when it’s locked in land, livestock and legacy.
