Has The Chancellor Made An Enemy Of Britain's Farmers?

Although farming only accounts for about 2 per cent of UK GDP, the role of farmers as custodians of the countryside and providers of food means agriculture assumes a disproportionate place in the national discourse.

- SEAN O'GRADY

It is high profile and, since July’s general election, well represented in all three main political parties in the Commons. No surprise, then, that Rachel Reeves’s proposed expansion of inheritance tax to include farmland has sparked considerable controversy...

What is Reeves doing?

She’s hiking tax by reducing the previous 100 per cent uncapped exemption from inheritance tax under agricultural property relief (AGP) covering land, associated buildings and businesses, livestock and areas set aside for environmental purposes. The new rule will be an exemption for AGP to the value of £1m, and then the rest (ie only on the extra slice above £1m) being subject to a 50 per cent charge. This can be paid in 10 equal instalments over a period of 10 years. Thus, someone inheriting a farm worth say £2m will, from next April, be likely to be liable to a charge on the £1m over the £1m limit at a typical marginal rate of 40 per cent – so £200,000. This could be spread at a rate of £20,000 per annum for a decade.

What’s the problem?