Labour's inheritance tax reforms to impact working farms more than landowners, report finds
Landowners are less likely to be impacted by the Government’s controversial inheritance tax reforms than farmers, a new report has found.
The Centre for the Analysis of Taxation (CenTax) said that its analysis of HMRC data has estimated that 30 per cent of farm estates will be affected by Rachel Reeves’ changes.
In last year’s Budget, Ms Reeves introduced a 20 per cent inheritance tax rate, half the normal levy, on agricultural land and businesses worth more than £1m.
This would scrap exemptions which meant that no tax was paid to pass down farms and other rural firms to family members.
The plans have faced intense opposition from the sector, which says cash-poor, asset-rich farmers will be forced to sell their land.
CenTax said its analysis showed that 200 farms a year valued at less than £5m will be impacted.
However it also said that landowners are less likely to be impacted by the reform than working farmers.
Ms Reeves said that one of the main reasons for the changes was to stop wealthy families banking land to avoid paying inheritance tax.
However, groups such as the National Farmers’ Union and the Country Land and Business Alliance have said the measures still incentivise people to use land to reduce their tax liability, and have urged the Chancellor to adopt a clawback system instead.
Dr Andy Summers, CenTax’s director, said: “The relief could be better targeted to reduce its use for tax planning and further extend protection for businesses, including farms.”
CLA President Victoria Vyvyan added: “These reforms to inheritance tax will cost the Exchequer £2bn, with 200,000 jobs lost and £15bn in lost economic activity. This is the reality of what is happening.
“Enough of this nonsense, it is time for Sir Keir Starmer to show some leadership and tell Treasury ministers they have it wrong and must change tack for the good of the country.
“While a higher relief threshold would help some businesses, it would only minimise the damage, not remove it entirely.
“In considering any alternatives, the Treasury must become more willing to work with businesses and entrepreneurs to understand how growth can be stimulated for businesses of all sizes, rather than steamrollering through such a short-sighted and damaging policy.”