Farming & inheritance tax
If the Government was hoping that the deep concern over its plans for inheritance tax on farmland would go away in the New Year, it was reminded last week that farmers remain as incensed as ever about the changes. About 100 tractors blockaded Oxford city centre when the Environment Secretary was giving a speech at the Oxford Farming Conference.
He was honest enough to admit that the changes were “very unwelcome” (that’s quite the under-statement) and not something that the Government had wanted or intended to do.
I’ve spent some of the past few weeks talking to farmers in my constituency who are very worried about the changes. But what they’ve also told me is that the current tax situation isn’t working for them either. In fact, in many ways, it’s harming ordinary working farmers.
I heard about a 350-acre farm in Suffolk which was bought recently by a merchant banker from London who didn’t even visit the property so clearly had no intention of farming it. In fact, he bought it before it even went on the market, to add to his existing property portfolio and minimise his inheritance tax liabilities.
If this was an unusual or exceptional case, that would be bad enough. But it isn’t. According to one nationwide land agency, non-farmers bought more than half of the farms and estates sold on the open market in England in 2023. The amount of land bought by ordinary farmers was the lowest on record. That is an astonishing state of affairs.
What makes it worse is that the interest of very wealthy outside investors is driving up land prices, which are now at a record high. As one farmer told me, when an ordinary working farmer hopes to expand, the last thing he or she wants is high land prices. Yet that is exactly what they’ve got.
So while farmers have genuine fears that their children will not be able to inherit the family farm and continuing producing food, what’s become clear is that they are already being squeezed out of buying more land. If they can’t expand, they can’t increase food production, affecting our food security. It also makes it harder for them to set aside land for environmental benefits.
The current tax situation is not sustainable. It’s not helping ordinary farmers and it’s depriving the Government of tax revenue which is needed to fund our crumbling public services such as schools, health care and public transport. I want to see it changed so that the very wealthy pay their fair share of taxes, while genuine farmers can carry on doing what they do best – growing and producing food for us all.
But the Government’s plans won’t achieve either of these aims. The reduced inheritance tax rate being proposed will still entice wealthy investors who want to limit their inheritance tax liabilities, while farmers will face huge tax bills when they try to pass on a family farm to the next generation. Many will end up having to sell land to meet the tax liability with an impact on our food security.
This policy has been badly drawn up and thrown together without taking into full consideration what’s been happening in the farming sector, in particular the steep rise in land prices which makes the average-sized family farm worth on paper several million pounds, even though the farmer may be earning barely more than the minimum wage.
There is a clear solution to this. Close the tax loophole to deter investors and, hopefully, bring down land prices but protect genuine farmers by raising the threshold much higher than the proposed £1 million. That’s what the farmers and local National Farmers Union reps I’ve spoken to want to see.
Farming is an absolutely critical industry – vital for our food security, the protection of wildlife and our response to climate change. But if we want to protect it, there must be a fair deal for farmers to include: ensuring the funding pots for environmental land management schemes are adequate and easy to access; tackling the power of the supermarkets and stopping them squeezing the prices that farmers receive; and addressing the existing tax loophole.
The Conservatives and others who want to keep the status quo aren’t acting in the interests of genuine farmers – they are protecting the interests of very wealthy investors. I want to see those with the broadest shoulders like these wealthy investors pay their fair share of tax. I also want to family farms to thrive.
The Chancellor should close this tax loophole while raising the inheritance tax threshold to protect ordinary farms. After a very difficult 2024, it would at least bring some relief to farmers for the year ahead.
Adrian Ramsay MP
