Failing to distinguish between active farmers and passive landowners is a fundamental flaw

Inheritance tax (IHT) reliefs, most notably Agricultural Property Relief (APR), have been reshaped. And let me be clear - this is no small adjustment. For Scottish farmers, whose livelihoods depend on continuity, long-term planning, and the passing on of land and knowledge from one generation to the next, this is a seismic shift.

For decades, APR has been the backbone that allowed family farms to transfer largely intact across generations, protecting them from inheritance tax. That principle has now been upended. NFU Scotland, alongside the other UK farming unions, fought hard for concessions. Yet the introduction of a cap on full relief represents a clear break from the certainty that families relied upon.

Under the new rules, 100 per cent relief applies only to the first £2.5 million of qualifying agricultural and business assets per individual. Beyond that, relief drops to 50 per cent, exposing some assets to effective IHT rates of up to 20 per cent.

Couples can combine allowances to protect £5 million, and liabilities may be paid over ten years without interest. But for many Scottish farms - asset-rich yet cash-poor - these figures are abstract; the reality is stark: land, buildings, and machinery do not produce the liquid cash to meet tax bills.

NFU Scotland represents over 8,500 member businesses, collectively supporting more than 50,000 people. For these families, APR has been a lifeline. Now, the certainty they have relied on for generations is gone. Some will face impossible choices: selling land, restructuring businesses, or reducing the scale of operations.

Succession planning, once careful and measured, is now urgent, complex, and fraught with risk.

These reforms carry wider implications. Fragmented holdings, distorted land use, and barriers for new entrants threaten the long-term sustainability of Scottish agriculture. Our national priorities - generational renewal, sustainable land management, thriving rural communities - are now in tension with this policy.

The legislation treats all landowners the same, failing to distinguish between active farmers and passive landowners. This is a fundamental flaw. Reliefs should reward those who produce food, care for the land, and sustain rural livelihoods - not merely those who hold title deeds.

Family farms are more than businesses.

In the time it would take me to list all they contribute to our society, you could have thought of ten more. So instead of listing, I will ask you to think. And then perhaps it becomes clear that policies that disrupt their continuity carry consequences far beyond the balance sheet.

This is why NFU Scotland has consistently called this unfinished business. How do policymakers intend to that Scotland’s farming heritage is preserved, and that the next generation can take up the mantle without being penalised for the very success their predecessors built?

Whilst policymakers can take the time to consider this; the legislation is now law. Farmers must take action. It is essential that those who have not yet sought professional advice do so urgently, to help manage the impacts on the future of their family farms.

These reforms mark a turning point. They bring uncertainty and challenge - not simply about tax rules, but about the future of Scottish family farms, and by extension, the future of rural Scotland itself. Against a backdrop of global instability – it does beg the question; how much longer can farmers be expected to absorb shocks before reaching a breaking point?

NFU Scotland will continue to fight for a system that recognises the unique nature of farming, that supports active agricultural businesses, and that enables the next generation to steward Scotland’s land responsibly, sustainably, and profitably.

Jonnie Hall is Director of Policy and Deputy CEO of NFU Scotland