There has been a manure storm in the wake of Rachel Reeves’ Autumn Budget. It has come from far-right foghorns like Reform UK MPs an Jeremy Clarkson, over the idea that the Labour Party is punishing farmers with inheritance tax changes. However, the reality doesn’t match the propaganda.
Farmers being attacked by Labour – if you believe far-right foghorns
Clarkson led the charge against Labour over what he painted as an attack on farmers:
Farmers. I know that you have been shafted today. But please don’t despair. Just look after yourselves for five short years and this shower will be gone.
— Jeremy Clarkson (@JeremyClarkson) October 30, 2024
Reform MP Rupert Lowe chimed in:
Decent British farmers who wish to pass their farm down to their children have had those hopes shattered by this urban Labour Government
They don’t understand the countryside, and they don’t understand farming.
Who suffers? Hardworking farming families.
The nasty party.
— Rupert Lowe MP (@RupertLowe10) October 30, 2024
And the Telegraph lapped it up. As it reported:
Clarkson – whose Cotswolds farm is the subject of the Amazon Prime series Clarkson’s Farm – was one of many in the farming community who condemned the Chancellor’s decision to cut back the valuable inheritance tax relief.
In Ms Reeves’s maiden Budget, she closed three “inheritance tax loopholes”, including limiting how much business owners and farmers can leave to their families tax-free.
Tens of thousands more families will pay the divisive 40pc levy because of Ms Reeves’ decision to end pension tax relief while also slashing tax breaks for farmers and business owners.
Under the current rules, families can inherit business and farmland assets of any value without paying inheritance tax. But from April 2026, only assets up to £1m will be tax-free, with assets above this threshold qualifying for 50pc tax relief, resulting in an effective 20pc tax charge.
Announcing the measures, Ms Reeves said the 50pc tax relief “will ensure we continue to protect small family farms and three-quarters of claims will be unaffected by these changes”.
But the move was condemned by farmers’ associations, who warned it could threaten the future of family farms and therefore food supply chains.
Tom Bradshaw, of the National Farmers’ Union, said: “This Budget not only threatens family farms but also makes producing food more expensive, which means more cost for farmers who simply cannot absorb it and it will have to be passed up the supply chain or risk the resilience of our food production.”
Back in the real world
However, Clarkson, the right-wing National Farmers’ Union, and the Telegraph are misrepresenting the situation. The Canary saying that is something – given we’ve been highly critical of Labour.
Agricultural Property Relief is designed to prevent family farms from being broken up due to inheritance tax bills when they’re passed onto the next generation. However, the vast bulk of the tax relief goes to a small number of the wealthiest families, many of whom are not active farmers.
Following this week’s budget, farmers will continue to be able to pass on £1m of agricultural and business property tax free, on top of their existing allowances.
Above £1m, estates will now pay a reduced inheritance tax rate of 20% on agricultural and business assets, compared to the standard 40% inheritance tax rate.
On top of this, farmers will continue to benefit from the existing inheritance tax thresholds – which are up to a further £1m for a married couple if their estate includes passing on a family home to immediate family members.
That means the new rates of inheritance tax will usually only kick in for estates worth more than £2m. For those who do have to pay inheritance tax on agricultural property, the tax bill can be paid over 10 years.
Changes to agricultural property relief, combined with other reforms to inheritance tax, will bring in an extra £520m by 2029.
Actually hitting rich landowners – like Reform MPs
The reforms announced yesterday will affect roughly 15% – 20% of estates that include agricultural property.
According to CenTax research based on HMRC data, between 2018 to 2020, an average of £900 million in Agricultural Property Relief went to around 1,300 estates per year. Almost two thirds (64%) of all Agricultural Relief went to roughly 200 estates per year that each claimed more than £1 million in relief, with an average estate value of £6 million.
The government’s own analysis suggests that 73% of estates with agricultural property won’t be affected by these changes.
Many people invest in agricultural land as a way of reducing their tax bill, with little direct interest in farming itself. Like Reform’s Lowe:
Your daily reminder that Rupert Lowe is not a farmer.
He’s a businessman who owns farm land. He doesn’t farm. He’s a landlord (that converted 100 acres from farm to horse racing training facilities). pic.twitter.com/vwknbUbp2d
— Reform Party UK Exposed 🇬🇧 (@reformexposed) October 31, 2024
Oh, and Clarkson too:
Clarkson bought a farm to protect his wealth against tax and has made millions of pounds off the back of his series. He doesn’t represent ordinary farmers.
— Damien Quirk 🇪🇺🏴🇮🇪🇺🇦 (@damienquirk) October 30, 2024
However, according to CenTax’s report, among estates that benefited from Agricultural Relief between 2018 and 2020, less than half (44%) of individuals had received any trading income from agriculture at any point in the five years prior to death.
Only 10% of all beneficiaries of agricultural relief received an average of more than £10,000 per year in agricultural income over the five tax years prior to their death.
Farmers: don’t believe the bull over the Budget
Robert Palmer, executive director at Tax Justice UK said:
I can understand why farmers are worried about these changes, but the evidence shows that the main beneficiaries of agricultural property relief are the wealthiest families, many of whom are not active farmers.
The changes brought in are designed to limit the ability of wealthy estates to use the purchase of agricultural land to reduce their inheritance tax bills. The country is in a mess and public services desperately need more money – it’s only fair that those with the broadest shoulders pay their fair share.
Featured image via the Canary
