Rachel Reeves has eased inheritance tax on agricultural property after pressure from farmers.
As the chancellor made her budget speech on Wednesday, the Treasury announced changes it said could save farmers and business owners £30m next year when passing on property and £70m a year in the following four years. Farmers, who had driven tractors up to the doors of parliament, were protesting outside at the same time.
From April, farmers and small business owners who are married, are in a civil partnership or have deceased spouses, will be able transfer their inheritance tax allowance of up to £1m of full relief to each other if one of them dies without having used their allowance. The change means a farmer could leave their £1m allowance to their partner, and use their own £1m allowance, to pass on £2m of farmland to their children without paying inheritance tax.
The chancellor’s announcement in last October’s budget that she was bringing farms and other agricultural property into inheritance tax rules to raise money for public services and close a tax loophole exploited by some wealthy landowners prompted large-scale protests.
Farmers drowned out ministers’ speeches with tractor horns after Reeves said she was ending a decades-long exemption for farms and would make inheritors pay 20% of the value of agricultural and business property above £1m.
On Wednesday morning, before the budget, farmers defied police restrictions and parked more than a dozen tractors around Trafalgar Square and protested in Whitehall over a number of issues, including inheritance tax. Several people were arrested.
David Gunn, an arable farmer and agricultural contractor from near Sevenoaks in Kent, said his message to Labour was: “You said in the manifesto you would look after the farmers, which you totally haven’t, you’ve ruined the countryside.”
The tax expert Dan Neidle said the chancellor had made a “sensible change” that meant farmers would not need to take extensive long-term tax planning measures.
Tom Bradshaw, the president of the National Farmers’ Union, said: “It’s good to see the government accepts its original proposals were flawed. But this change goes nowhere near far enough to remove the devastating impact of the policy on farming communities.”
He added that the change would help widowed farmers but “it does nothing to alleviate the burden it puts on the elderly and vulnerable” and urged the government to address this with further measures.
