A heated debate over farm inheritance tax has reached a critical juncture, with the government standing firm on its revised proposals, leaving both sides with a sense of victory and defeat.
The government's initial plan to raise farm inheritance tax sparked widespread protests, with farmers and rural businesses feeling the brunt of the proposed changes. However, the government has now drawn a line in the sand, stating there will be no further amendments to the already modified tax threshold.
Protestors, undeterred, attempted to disrupt a speech by Environment Secretary Emma Reynolds at the Oxford Farming Conference, using a tractor demonstration to make their voices heard. But Reynolds stood her ground, acknowledging the influence of those who engaged constructively with the government, not those sounding horns.
The original proposal, announced in Chancellor Rachel Reeves' first budget in 2024, aimed to tax inherited agricultural assets over £1 million at 20%, half the standard inheritance tax rate. This would have raised an estimated £520 million annually by 2029. The government justified this change by arguing it would protect smaller farms and prevent wealthy investors from exploiting farmland as a tax loophole.
However, following months of protest, the government climbed down, raising the threshold to £2.5 million in December. This, coupled with an exemption allowing farmers to pass on assets to their spouses tax-free, means a couple could now pass on up to £5 million in qualifying assets without paying tax.
But here's where it gets controversial: the Country Land and Business Association (CLA), representing rural land and business owners, vows to continue its campaign to reverse the policy entirely, calling the government's partial climbdown a welcome relief but also an acknowledgment of the ill-thought-through and damaging nature of the reforms.
The National Farmers' Union (NFU) also remains opposed to the tax in principle, planning to push for further changes at the next political opportunity. Yet, its president, Tom Bradshaw, acknowledges the relief felt by many farming families across the country, with the change removing the tax burden from a significant number of family farms.
And this is the part most people miss: the environment secretary also pledged there would be no more sudden closures of farming payment schemes, addressing concerns over the Sustainable Farming Incentive (SFI), a key environmental programme for England.
The SFI, which pays farmers for public goods like insecticide-free farming and wildflower strips, was suddenly closed last March due to fully allocated funding for the year, causing significant uncertainty and concern within the farming sector.
A farming profitability review, commissioned by the government and led by former NFU president Baroness Minette Batters, warned late last year that the sector was bewildered and frightened, with inheritance tax and SFI payment changes causing ongoing worry.
On Thursday, Reynolds outlined plans for a simpler, fairer, and more stable scheme, admitting mistakes were made with the payments in the past. She announced the first application window for the new scheme in June, targeting small farms under 50 hectares and those not already in a payment scheme, followed by a second, wider application window in September for all farms.
Reynolds emphasized the importance of using agricultural payments to fund environmental benefits, stating that protecting the environmental foundations of farming is essential to profitability.
The government is considering changes to the scheme, including streamlining the number of nature-friendly farming initiatives, limiting the amount of land that can be put into action, and capping the amount of money a farm business can receive for SFI.
The Wildlife Trusts emphasize the vital need to increase the farm payments budget for environmental schemes to effectively tackle climate change and wildlife decline.
So, where do you stand on this issue? Do you think the government's revised proposals strike the right balance, or is there still room for further changes? Let's discuss in the comments and continue this important conversation.
