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Farmers are preparing for their biggest protest yet over the government's proposals to include them in the inheritance tax, as they prepare to gather in Westminster on Tuesday.
In the weeks since Chancellor Rachel Reeves' announcement, farmers and their representatives have been lobbying hard for the inheritance tax decision to be overturned.
The government wants farmers to pay tax on assets over £1m each at a reduced rate of 20 per cent.
The subsidy is on top of the £500,000 a typical homeowner receives if they leave their home to their children or grandchildren, so a married couple could receive up to £3 million from HMRC – a sum that will exclude most farms.
Groups such as the Liberal Democrats have suggested that up to 70,000 farms could be affected, although this figure assumes a tax-free inheritance limit of £1m rather than £3m.
The government says the UK's 500 largest farming properties will pay the tax each year, while smaller farms “will not be affected”, and independent analysis by Dan Neidle, a tax expert, suggests just 100 per year will be captured.
But inheritance tax is incredibly unpopular, and farmers who have staff to consider will also have to deal with higher national insurance bills from employers, as Mrs Reeves wants to lower the threshold at which it is paid.
“They're pretty angry,” says Sam Dewes, a wealth manager whose clients include HW Fisher farmers.
And the math favors married couples, which many consider unfair. In fact, being married on an average farm makes all the difference.
According to estate agent Carter Jonas, the average arable land is priced at £9,667 per acre, while grazing pasture costs £7,833.
The average English farm was 87.9 hectares in size, or 217 acres in 2023, according to government figures. For a mixed half arable and half pasture farm, this values a medium-sized farm at £1.9 million per land, excluding buildings and equipment, putting it below the limit for a couple.
But for a single farmer who has been divorced or never married, at least £400,000 will be left out of the free allowance, costing his heirs £80,000.
There are ways to avoid paying, Dewes says.
The easiest thing is to give away the business. Hard-working farmers concerned about the tax can give their farms to their descendants – or whoever they want – and pay no tax as long as they live another seven years.
In practice, this means withdrawing from the business, which some may find difficult.
“To the extent that they're still working on it, they want to be able to call all the shots and make the decisions, and once they've given things away, it becomes a lot harder to do that, because it's no longer your responsibility.” thing,” says Mr. Dewes.
The feeling that it is necessary to be married or be able to accurately predict your own death to avoid the tax is probably the biggest source of unhappiness for many farmers, even if they are not affected by the tax, he says, since these circumstances seem unrelated. . to agriculture or justice.
“The people who could be most affected, which is probably the saddest thing about the new rules, would be those who, for example, are not married and die at 50, before they have had a chance to pass it all on while they are still alive, working very actively on the farm.”
Another option for farmers is to put the farm into a trust, although this costs money and is still subject to tax, albeit at a regular trickle rather than a one-off lump sum in the event of death.
But there could be a silver lining for family farmers in other ways.
In 2018, Farmers Weekly reported that non-farmer buyers outnumbered farmers when purchasing agricultural land for the first time.
Now, according to data from Strutt & Parker, farmers account for just 31 percent of land sales in the first nine months of this year, down from 68 percent in 2008.
Investors, the wealthy and so-called lifestyle buyers who want land for leisure have been displacing farmers and driving up land prices for some time now. If the benefit of avoiding inheritance tax evaporates, they may be less interested in buying, which will lower the price of land.
Cheaper land is good news for farmers expanding their businesses and also means it is harder to break the £1.5m or £3m barrier.
If the government wants to collect taxes from the wealthy who use farmland to evade taxes and protect working farmers, then it could continue with its plan but only trigger the tax on one sale, Dewes says.
“I think, in general, that element of politics is not something that bothers people too much.”
That way, working farmers could continue without paying the tax, while those hoping to sell will only have to pay when the sale is completed and they have the money to do so.
