I farm 600 acres in North Herefordshire with my parents. My family has been farming 450 acres of that since the 1930s but I will never have to pay inheritance tax on it because we don’t own it. Like many farmers, we are tenants and could be left without a viable business should our farm be sold from under us.
Last month, Labour announced their proposal to scrap agricultural Property Relief (APR), which allows farms to be inherited without incurring inheritance tax (IHT). Furious farmers are heading for Westminster to protest against these inheritance tax changes, for what is expected to be the biggest protest yet over its policy agenda since Labour won the general election. The rally will hear from farming leaders, and celebrities including Jeremy Clarkson, who has accused the government of “ethnically cleansing” the British countryside. A procession will be led by children on toy tractors. Between 10,000 and 40,000 people are expected, as anger against the tax changes continues to grow.
The Budget did not remove APR entirely, but any farm over a £1 million threshold (with conditions) would be taxed at a reduced rate of 20%. To most people, £1 million sounds like a lot of money. Chancellor Rachel Reeves has certainly claimed “only” one in four farms would be affected. But land prices have risen dramatically over the past 70 years, from around £78 per acre in the 1950s (£1,700 in real terms) to an average of £7,800 in the 2020s. Arable land, suitable for growing crops, can fetch over £11,000 per acre.
The average UK farm is 250 acres, with many much larger than this in order to maximise production and efficiency. With land values so over inflated, £1 million does not buy much of a farm. Once a house and buildings are taken into account, a modest 100 acre farm could be valued at over £2 million. In reality, only hobby farms with a paddock and a couple of alpacas are likely to fall below the threshold. This is no doubt why the President of the National Farmers Union, Tom Bradshaw, claims that in reality three-quarters of operating farms are going to be affected by the tax change.
The 150 acres we worked hard to own was purchased four years ago (technically the bank still owns half of it). North Herefordshire is a beautiful part of the county and despite our plot just about being large enough to support one person, it would easily fall within the scope of the new rules but would likely be unviable should both a mortgage and repayments on an inheritance tax loan be due.
It is important to realise that the value of land is completely uncoupled from its earning potential. Profits have not kept pace with land price inflation, partly driven by wealthy individuals like first time farmer Jeremy Clarkson -a self-confessed inheritance tax dodger.
Farm business incomes fluctuate wildly from year to year at the mercy of external factors. They battle weather (the wettest 18-month period to April 2024 preceded one of the worst harvests on record), input costs (fertiliser prices rocketed following Russia’s invasion of Ukraine costing farmers an additional £1.4billion), and have little to no control over the price they receive for what they grow when it enters a commodity market. Alongside this uncertainly farms can now throw in the gradual removal of the Common Agricultural Policy (CAP) subsidies following Brexit. Instead, farmers are now eligible for public money if they change the way they farm under the new Environmental Land Management Scheme (ELMS). Some of these payments are attractive, but this is not free money. Many of the new options require considerable time and resources, both in the field and the office.
So, while a 100 acre farm may be worth £2 million, few families would be able to survive solely from selling the food grown upon it, let alone come up with the cash necessary to pay 20% of its value unless they sell the very thing they rely on to produce income: land.
None of this takes account of the fact that 14% of all farmers rent their entire farm. Many of these tenancies are on such short leases and high rents, with no access to public payments (the landowner often keeps those for themselves) that it is impossible to plan for and invest in the future. If the farm is sold by the landowner to pay inheritance tax, these tenants will find themselves without both a job and a home. Should the APR reforms bring down the over inflated value of farmland, see city investors selling up once there is no incentive to own it, or bring to market land that has been locked up for centuries, a positive outcome could be more new entrants to farming able to access land than ever before. Conversely there is a fear landowners will find other, more tax efficient ways to utilise their assets that don’t involve growing food.
The devil is, as ever, in the detail. Some of the more measured responses to Labour’s proposals have pointed out that farms will still be exempt from inheritance tax if they are handed over to the next generation before seven years of death. The upside to this may be that in an industry where farmers refuse to let go of the reins long into their 70s and 80s, succession planning is forced upon those who’ve been reluctant to do so. But there is another dark truth about farming; agriculture is the most dangerous profession in the UK, with the worst rate of fatal injuries across the industrial sectors. It is no wonder, then, that some have dubbed Labour’s proposal the ‘sudden death tax’.
The stresses – financial and otherwise – of farming can also take a great emotional toll. Last month, a post circulated on social media claiming that a farmer had taken his own life. Sadly, such tragedies are not uncommon in the farming community. The industry’s suicide rate is double the national average. This news stood out, however, because it claimed the farmer had ended his life in anticipation of Labour’s first budget in 14 years. I had hoped this was just another twisted story from the depths of social media but last week the farmer’s son identified him as John Charlesworth, a 78-year-old farmer from Barnsley, Yorkshire. He confirmed that his father, distraught by the thought of his farm having to be sold to pay inheritance tax, had ended his life so that his family could inherit the 70-acres without penalty.
The government offers free business advice that could help those worried about the proposals. Farmers are being urged to speak to financial planners and it is hoped this will mean it is only the billionaires - and media personalities - who are caught out by the tax, rather than family farms. Even if this becomes the case, the damage caused by the fear of this will be hard to recover from. Is it worth it? From government figures, the exchequer lost around £500m due to APR in the year 2021/22, which, to put it into context is around 2% of Shell’s annual pre-tax profits.
The countryside and farming needs coherent, long-term planning and investment. The implementation of the Landscape Recovery Schemes (the most ambitious of the ELMS programmes) is expected to run for at least 20 years, the duration needed to achieve outcomes such as restoration of wildlife corridors, supporting the recovery of vulnerable species or improving the health of rivers and streams. It has great potential to help reverse biodiversity loss and pollution. We desperately need this: after all, the UK is one of the most nature depleted countries on the planet. But neither farmers nor DEFRA will want to include land in a project likely to change hands/be sold to pay tax - before the scheme is completed.
Tragically, with the correct financial advice, Mr. Charlesworth might still be here today. The terrible truth is that it is too late for him to receive it. And given the anger and fury from the farming community, the other tragedy is that even if Labour amend or withdraw their proposals, too many bridges may have been burned. As far as many farmers are concerned, it is now too late for them too.
