UK Farmers Face Inheritance Tax Changes
Thousands of farmers plan to protest in central London this Tuesday. They are opposing recent changes to inheritance tax that could harm family-run farms. The government claims these reforms will not affect food security. However, many farmers believe these changes threaten generational farming.
What Are the Tax Changes? Since 1992, agricultural property relief (APR) allowed family farms to pass down without incurring inheritance tax. This was meant to keep farms in families and protect food security. But new budget changes start in April 2026. Full 100% relief will only apply to the first £1 million of combined agricultural and business property. Any amount over that will be taxed at a reduced rate of 20%. While farmers can pay tax over 10 years interest-free, they say the changes make their businesses less viable.
Why Does the Government Believe These Changes Are Necessary? The government argues these changes are needed to fund public services like the NHS. They expect to raise £200 million a year from these reforms. Officials claim that small family farms will not be affected, with only about 500 estates facing a higher tax burden. Critics challenge this view and say more farms will actually be impacted because of the £1 million combined threshold, particularly for those with valuable equipment or diversified activities.
Are the Government’s Claims Accurate? Critics argue the government’s numbers are misleading. While 500 estates did claim APR last year, combining APR and business property relief (BPR) increases the chances that more farms will exceed the £1 million threshold. For example, a combine harvester can cost up to £500,000. Furthermore, farmers point out that nearly 66% of the UK’s 209,000 farms are worth over £1 million, which means many could be affected.
Political Implications The tax changes have caused a significant political backlash. This is especially true in rural Labour constituencies, many of which were won by narrow margins. There is growing concern that farmers feel neglected by the party. Over the years, farmers have struggled with financial pressures from supermarkets and lost subsidies after Brexit. The new tax changes add to their fears of not being able to pass on their farms to the next generation.
Potential Alternatives Farmers have proposed several alternatives. They suggest a French-style system that grants tax relief only to active farmers. Others propose support for older landowners who may not survive the seven-year period required for tax-free asset transfers. Some advocate for separating APR and BPR again or introducing a wealth tax for the wealthiest estates that benefit disproportionately from tax exemptions.
Amid these tensions, there are calls for greater scrutiny of the broader tax system. Some point to loopholes that allow aristocratic estates to evade inheritance tax while causing environmental harm. As the debate intensifies, the long-term effects of these tax changes on farmers and the government’s relationship with rural voters remain uncertain.
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