Tax time bomb - Scrapping inheritance tax reliefs would tear apart family farms and damage food security, new poll finds

Scrapping inheritance tax reliefs would tear apart family farms and damage the UK’s food security, according to a new poll.

More than 500 farmers and landowners responded to a recent poll by the Country Land and Business Association (CLA), amid concerns the government is looking to change agricultural property relief (APR) and business property relief (BPR) in the budget next month.

It found:

• 86% of respondents said it was ‘likely’ that some or all of their land would have to be sold upon their death, if inheritance tax reliefs are scrapped. Less than 5% said it was ‘unlikely’.
• More than 90% said scrapping reliefs will damage the UK’s food security in the long run. Just 5% said they did not believe the move would hit food security.
• The CLA says the findings demonstrate the danger of removing or curtailing reliefs, at a crucial time for the farming industry.

CLA President Victoria Vyvyan said: “This government has promised economic growth but at the moment, in the rural sector, we’re not feeling the love. There is a chill wind blowing through the tax environment and CLA members are very nervous that careful plans to sustain multi-generational businesses are about to be thrown to the wolves.

“The government has said it won’t increase taxes on working people. Farmers are working hard around the clock feeding the nation and looking after the environment, and uncertainty over tax is one of the most pressing challenges facing the rural sector.

“Removing or even capping inheritance tax reliefs would have a major impact on the viability of family farms, jeopardising the future of rural businesses up and down the country.

“Many farmers could be forced to sell land to pay inheritance taxes, putting livelihoods, and the nation’s food security, at risk, especially if the land is bought by corporates with deep pockets and no inheritance tax concerns.

“At a time of profound change in the industry, we need stability for our businesses while we adjust to new agricultural policies.”

APR exists to ensure the continuance of farming after the death of the farmer, while BPR fulfils the same objective for other types of family businesses.

Reliefs allow farmers and rural business owners to continue to produce food, maintain landscapes and support the rural economy. Maintaining a stable capital tax system is important to provide business owners confidence to make long-term commitments, particularly those needed when investing for growth or to deliver for the environment over the coming decades.

If there was no relief, or even if it was capped at £500,000 as some have suggested, there would be a high tax bill to pay. Government statistics show 17% of UK farms failed to make a profit and 59% made a profit of less than £50,000 in 2022/23. This leaves little scope to pay inheritance tax out of farm income.

Although it is not possible to establish the exact impact on rural businesses of removing inheritance tax reliefs, if it led to a reduction of 5% in the number of businesses registered in rural areas, this would equate to over 27,500 businesses and potential unemployment of 190,000.

For an average family farm of 215 acres, without IHT reliefs, 40% of the farm’s land would need to be sold to fund inheritance tax liabilities. Diversified farmers would be hit harder: 46-54% of their farm’s land would need to be sold. In aggregate, this poses a real risk to the capacity and efficiency of the food sector in this country.

To provide rural businesses with certainty, allow them to forward plan and ensure agricultural land that is vital for food security and environmental objectives is not sold off, the government must ensure a stable tax regime by committing to retain APR and BPR in their current form.

James Grindal, who farms in South Leicestershire, said:

“Scrapping APR relief would mean the death of my family farm. Like many small farms, we survive on slim margins and wouldn’t have the funds to cover this hefty tax.

“I’ve spent years building a farm I can pass down through generations. It’s not just a business, but a way of life, a culture and a legacy. To see that wiped out with one single tax bill would be devastating.

“As farmers, we want to feed the nation but cannot do that if we’re forced to sell our land. Labour campaigned as the party of the countryside. This will be the first major test of whether they truly have our backs.”