Government reaffirms 'family farm tax raid' despite mass protests planned

A report by the BBC’s Newsnight programme has suggested that the Department for Environment, Farming and Rural Affairs felt like it wasn’t consulted about the changes to agricultural property relief.

Measures announced in Rachel Reeves’ first Budget could see farmers pay an effective rate of 20 per cent inheritance tax on assets over £1 million.

Previously, farmers were exempt from inheritance tax to allow family farms to be passed down through the generations.

The BBC has reported that Defra was only informed of the move by the Treasury the night before the Budget, and has sought to bring in some mitigation.

However, a department source pushed back on this to The Yorkshire Post.

A spokesperson said: “With public services crumbling and a £22 billion fiscal hole inherited from the previous government, we have made the difficult decision to reform APR in a balanced and fair way. 

“All ministers support the policy and it will not change.”

There have also been major disputes about how many farms will be affected by the changes. 

The Treasury has maintained that 27 per cent of claimants of APR will be impacted, however The Yorkshire Post understands this includes all rural landowners, such as people with small holdings.

Defra’s most recent figures from the 2022-23 financial year found the average net worth of a farm was £2.2m, while 49 per cent of farms had a net worth of at least £1.5m.

The Chancellor has said that in some cases the threshold could in practice be about £3m, if couples combine their own personal inheritance tax allowances when passing on their land.

While analysis by the Country Land and Business Association suggests a “typical” arable farm of 200 acres (80 hectares), making a profit of £27,300, would face an IHT liability of £435,000.

The farm would have to allocate 159 per cent of its profit each year to cover the tax bill, if spread over 10 years, and may lead those inheriting the land to sell as much as 20 per cent of their farmland, the CLA said.

The CLA’s calculations build upon warnings from the National Farmers Union, which has estimated that 75 per cent of food production in the UK could be within the scope of Ms Reeves’ changes.

Shadow Farming Minister Robbie Moore has called on the government to release its impact assessment.

The Keighley and Ilkley MP told the House of Commons yesterday: “The figures being repeatedly regurgitated by the Government consider only past claims for agricultural property relief, not those combined with business property relief, which is just as important. 

Why? Because the Treasury does not have the data. 

“We need comprehensive detail on this policy to properly understand the impacts of his family farm tax.”

Environment Secretary Steve Reed remained adamant that “three quarters of farmers will pay nothing as a result of these changes”.

“Family farming will continue into future generations, just as it should do,” he added.