A small change to the government’s controversial inheritance tax policy for farm businesses is nowhere near enough to protect many family farms and does nothing to remove the cruel impact of the policy on elderly and vulnerable farmers, according to the NFU.
In her Autumn Budget today, Chancellor Rachel Reeves announced that the £1 million threshold of the family farm tax will now be transferable between spouses. This means that if a married farmer dies, they can leave it to their spouse, and the spouse will be able to use their deceased’s £1m, in addition to their own £1m to hand to their children on their death.
NFU President Tom Bradshaw 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.
“It’s only right that agricultural allowances can be transferred between spouses and it’s something we’ve been calling for, but it doesn’t go anywhere near far enough in protecting the working people of the countryside. It does nothing to alleviate the burden it puts on the elderly and vulnerable.
“It is also a huge smack in the face to the Labour MPs who have been working so hard to find a way through this for their local farmers. To them, we say thank you.
“The Chancellor said she wanted to ‘back working people not make them poorer’ and to ‘increase investment not cut it’. To do that, government must look again at the multiple solutions that have been put forward by industry and tax experts.”
Farmers again protested in London today to mark the industry’s opposition to the family farm tax, despite the Met Police announcing yesterday that they would not be able to bring tractors along. Despite a largely peaceful protest, arrests were made.
The NFU pointed out that more than 275,000 members of the public have called on the government to make changes, while trade associations representing 160,000 family businesses have wtitten to the Chancellor calling for reform to the policy. MPs from across the political divide have told the Chancellor about the impact it will have on the rural communities they represent; and independent tax experts have suggested changes to make it more targeted.
Further Budget blows
Mr Bradshaw added that today’s ‘minimal movement on the family farm tax’ comes alongside a range of other announcements in the Budget that could increase inflationary pressures on our food system.
He said: “Several other announcements in the Budget will hit farming and growing businesses hard. The increase in the National Living Wage, which will have risen 12% in two years, puts further cost pressures on agricultural and horticulture businesses and further inflationary pressures on our food system. At a time when the government has an ambition to get the country eating more fruit and vegetables, it will hit the horticulture sector hardest.
“The increase in the autonomous tariff quota (ATQ) for sugar cane undercuts British growers at a time when this government says promoting growth and investment at home is its priority.
“However, we believe farming may benefit from the announcements on apprenticeships and it could help bring the next generation into our food and farming sector.”
No u-turn
James Farrell, head of rural consultancy at Knight Frank, said: “As expected, there was no U-turn on the hated family farm tax, although allowing 100% relief to be transferred between spouses will be helpful for some families.
“It was incongruous, though, to hear Reeves claim that she was proud to use her budget to deal with injustices. How is making some elderly or unwell farmers feel that it would be better if they die before April next year not an injustice? With the April 2026 deadline approaching, many farms and estates now face significant succession pressures while the scope for the Treasury to address unintended consequences continues to narrow.
“The introduction of a new tax on residential properties worth more than £2m from April 2028 will also affect rural property owners adding another fixed cost for families who are often asset rich and cash poor.”
However, Paul Fairbairn, head of private wealth at Cripps, said the chancellor had ‘taken a step in the right direction’.
“The changes will spare many families unnecessary asset restructuring and will allow them to pass up to £3.3 million of business or farming assets to the next generation. It corrects what many viewed as an unfair anomaly and marks a rare instance of the government listening to public outcry and diluting a legislative change,” he said.
“However, it will not undo the fact that many such businesses will now be subject to inheritance tax for the first time ever, which in turn will have a significant impact on their ability to grow and generate wider economic activity. Given the relatively modest revenue this reform is expected to generate, it is a shame that the Chancellor has not acted more emphatically.”