The NFU is urging the federal government to take a look at its various ‘clawback’ resolution to forestall farmers turning into collateral injury from deliberate inheritance tax (IHT) reforms, after the federal government revealed particulars of the coverage.
On Monday, the Treasury revealed draft laws to implement the brand new IHT coverage throughout the finance Invoice for 2025-26, which will likely be in autumn 2025.
Underneath the coverage, as introduced by chancellor Rachel Reeves within the final Autumn Finances, Agricultural Property Reduction (APR) and Enterprise Property Reduction (BPR) will likely be diminished from 100% to 50% on property price greater than £1m from April 1, 2026. This implies IHT will apply at a diminished price of 20% above that threshold, with farming households in a position to unfold any expenses equally over 10 years, freed from any curiosity.
Relying on particular person circumstances, the brink at which farming households will begin paying IHT will likely be larger than £1m in lots of instances.
In response to Farmers Weekly, the coverage paper suggests, primarily based on the variety of claims for APR and BPR made in 2021-22 (the latest information obtainable), that simply 520 estates pays extra IHT in 2026-27, elevating about £500m for the exchequer.
“This implies nearly three-quarters of all estates claiming agricultural property aid in 2026 to 2027, is not going to pay any extra inheritance tax on account of the modifications,” it says.
The paper provides no impression evaluation, however it does touch upon meals safety, the report provides.
The NFU and others refutes these figures, insisting the precise impression will likely be a lot wider when the coverage comes into pressure. Proof from the NFU, in session with former Treasury and Workplace for Finances Accountability (OBR) economists to tell evaluation of the impacts of APR reforms on business household farms, discovered that as much as 75% of working farms might be affected, with some dealing with tax payments of £100,000s.
Clawback choice
The NFU famous that the federal government has outlined plans to carry a technical session on the draft laws, together with on inheritance tax, to make sure it ‘works as meant’.
This can be a widespread course of within the improvement of a Finance Invoice, however given the appalling penalties of this laws, the NFU stated it is going to be ‘holding the federal government to account on each component of this coverage’.
The NFU stated it has repeatedly offered proof that the present coverage doesn’t obtain the federal government’s intentions of closing a loophole, defending household farms, or producing as a lot income because it ought to, and that it disagrees that it’s ‘not anticipated to have a cloth impression on meals safety’.
The NFU’s ‘clawback’ resolution would permit the Treasury to boost the income it seeks with out tearing aside farming households or jeopardising home meals manufacturing.
It suggests changing the present system with one that enables farmers to solely pay tax once they promote or give away their farm to folks exterior their household, as an alternative of paying instantly or on a member of the family’s loss of life. This fashion, household farms can preserve their land and enterprise working with out having to promote to pay taxes, the NFU stated.
Cease the household farm tax
The NFU pointed that because the November Finances, swathes of MPs from all events, together with members of the federal government’s personal backbenches, alongside county councils, farming and enterprise organisations, the meals provide chain and over 1 / 4 of one million members of the British public have joined the decision to cease the household farm tax. The Workplace for Finances Accountability and the federal government’s personal Efra Committee have highlighted the impression these reforms may have on weak aged farmers.
NFU President Tom Bradshaw stated: “On the coronary heart of this battle are the aged farmers who’ve devoted their whole lives to rising meals for the nation and supporting their rural communities. They need to not grow to be collateral injury. To see them face such uncertainty, figuring out the legacy they and their households have labored exhausting for and grown might be ripped away by this tax, is heartbreaking. I can not start to think about the worry many have to be feeling proper now – their houses, their livelihoods and every part they’ve labored for is underneath risk.
“I’ve spoken on to the Prime Minister and Treasury Exchequer Secretary James Murray concerning the disastrous impression of this tax. But, regardless of our persistent efforts, Chancellor Rachel Reeves nonetheless refuses to fulfill us to debate our various ‘clawback’ proposal. The Treasury claims our resolution will elevate much less income, however is refusing to launch the modelling on the way it got here to this conclusion.
“I echo the Prime Minister’s personal phrases: getting this proper is extra vital than pushing forward with a coverage that doesn’t obtain its intentions.”
“The Prime Minister should now take his personal recommendation and hearken to the overwhelming proof that the present coverage is not going to work as meant. To disregard the implications this tax will deliver can be a betrayal of the very individuals who feed our nation. We can not stand by and watch the spine of the countryside be damaged when there’s a credible various being provided.”
