20,000 farmers went London this week to protest against the abolition of inheritance tax relief (“APR”)for agricultural land. Organised by the National Farmers' Union, the intention was to march to Westminster and back but due to the size of the crowd and safety concerns this was stopped.
Conservative leader Kemi Badenoch insisted that 'we know farming', and that 'we are the team that are working for you', as well as saying 'we have your backs', as she pledged to reverse Chancellor Rachel Reeves' imposition of inheritance tax at 20% from April 2026.
Badenoch said: 'Farming is the backbone of this country, without it we cannot survive, we know that we haven't always got it right, but this policy is so obviously unfair, so obviously cruel, we will do everything we can to make sure that in a few years' time if they do not U-turn now, we will reverse this tax.'
Reeves says, only farms worth over £1m, which increases to £2m when dealing with a married couple [this assumes joint ownership] will pay IHT. Additionally, the first £325,000 of any estate is paid at 0%. This can rise to £500,000 with the addition of the residential nil rate band [£175,00 or £500,000 per married couple] if a farmhouse residence passed to direct descendants.
TV presenter and farmer Jeremy Clarkson voiced his opinions on the recently announced IHT changes. He also mentioned the Budget changes to tax double cab pick-up trucks as cars.
He said initially he thought farmers were prosperous, drove Range Rovers and went skiing every February, but since taking up farming five years ago he has realised just how hard it is. Not so much for himself, but those that struggle financially to keep up with the costs of machinery, chemicals, and animal feed.
Clarkson said: 'I've come to understand just how unbelievably difficult it is, and complicated, dangerous, and cold, very cold! It's the costs that staggered me, £200,000 for a medium sized tractor, a combine, half a million pounds, all the equipment costs a fortune'.
'For the sake of everybody here, and all the farmers stuck at home today paralysed by a fog of despair by what's been foisted upon them, I beg the government to accept this was rushed through, wasn't thought out, and was a mistake.'
The take in IHT to the Treasury per year is projected to pull in just over £230m a year in 2026/2027, rising to £495m in 2027/2028 and according to Treasury figures, will affect around 25% of farms. But the Country Land and Business Association (CLA) disagrees with this, stating it believes that 70,000 UK farms could be affected by this change. However, the Department for Environment Food & Rural Affairs (DEFRA) say just 500 farms per year will be impacted.
CLA said: 'Family-run farms—typically asset-rich but cash-poor—would be forced at best into a cycle of stagnation, asset sales, or debt to cover this tax burden, threatening the long-term viability of the UK's rural landscape and food security.'
Reeves and secretary of state for DEFRA, Steve Reed, said in a joint statement:
'Farmers are the backbone of Britain, and we recognise the strength of feeling expressed by farming and rural communities in recent weeks. We are steadfast in our commitment to Britain's farming industry because food security is national security'.
'It's why we are investing £5bn into farming over the next two years – the largest amount ever directed towards sustainable food production, rural economic growth and nature's recovery in our country's history'.
'The reforms to APR ensure that wealthier estates and the most valuable farms pay their fair share to invest in our schools and health services that farmers and families in rural communities rely on.'
APR was introduced in 1984, allowing family farms to be exempt from IHT since then. Although a 20% charge is being introduced from April 2025, inheritors of farms are given 10 years to pay IHT bills, with no interest being accrued. Farmers say many will not be able to meet the IHT instalments from trading profits forcing land sales that will compromise the future trading viability.
One thing that everyone in the farming world seems to be agreeing on is that the number of potential farms affected by the changes will be higher than 25%.
Peter Nichols – Tax Director
BFN Accounts & Tax Limited