In a stunning turn of events, the Labour government’s first budget in over a decade has sent shockwaves through the farming community. Chancellor Rachel Reeves announced that starting in April 2026, agricultural property and businesses will no longer be exempt from inheritance tax. The move is expected to generate £1.8 billion in revenue by 2030, funds that will be directed towards improving public services. However, the decision has sparked heated debates and drawn sharp criticism from various quarters.
A Betrayal or a Necessary Step?
The National Farmers’ Union (NFU) has accused the Labour government of breaking its promise not to meddle with agricultural property relief (APR). Victoria Vyvyan, president of the Country Land and Business Association, went as far as calling it a “betrayal” of the rural economy. She argued that the new tax would discourage investment in advanced technologies that could boost productivity on British farms.
Celebrity farmer and former Top Gear presenter Jeremy Clarkson also weighed in on the controversy. In a post on the X social network, Clarkson urged farmers not to lose hope, saying, “Farmers, I know that you have been shafted today. But please don’t despair. Just look after yourselves for five short years and this shower will be gone.” Ironically, Clarkson himself may be among those affected by the change, as he previously admitted to purchasing his £4.25 million farm, Diddly Squat, to avoid inheritance tax on his estate.
The Reality Behind the Numbers
Despite the uproar, many tax experts and campaigners contend that the concerns may be overblown. Pre-budget analysis by the Centre for the Analysis of Taxation (CenTax) indicated that out of 1,300 estates per year between 2018 and 2020, only 200 claimed more than £1 million in relief annually. These 200 estates, which are among the wealthiest in Britain, accounted for a staggering 64% of all agricultural relief claimed.
The updated relief can be more generous for true family farms than the £1 million headline suggests.
– Arun Advani, Associate Professor of Economics, University of Warwick
Arun Advani, an associate professor of economics at the University of Warwick and a director of CenTax, explained that a married couple owning a farm together can split it in two, allowing for £2 million of agricultural property relief, plus an additional £500,000 for each partner if a property is involved. This means that a farm worth £3 million might not pay any inheritance tax at all, while those valued at £5 million may only pay less than 1% per year by spreading the cost over a decade.
Targeting the Ultra-Wealthy
It appears that the estates of some of Britain’s wealthiest individuals may bear the brunt of the inheritance tax changes. This could include billionaires like vacuum cleaner tycoon James Dyson, who owns 14,600 hectares of British farmland, and Danish fashion investor Anders Holch Povlsen, who reportedly holds more than 89,000 hectares in Scotland. Under the new rules, these vast estates may be liable for hundreds of millions of pounds in inheritance tax, whereas previously they would have paid nothing.
The vast majority of APR goes to the wealthiest families, many of which don’t have much to do with farming.
– Robert Palmer, Executive Director, Tax Justice UK
Robert Palmer, executive director of Tax Justice UK, has long advocated for reforms to agricultural relief. While he empathizes with the concerns of some farmers, he emphasizes that the lion’s share of the relief benefits the most affluent families, often with little connection to actual farming activities. Palmer underscores the broader context, stating, “The country is in a mess and public services need a lot more money.”
Political Fallout and Future Implications
Opposition parties have seized the opportunity to criticize the Labour government, hoping to capitalize on the discontent within rural communities. Greg Smith, the Conservative MP for Mid-Buckinghamshire, denounced the budget as a “full-frontal financial attack” on farmers. Meanwhile, Liberal Democrat leader Ed Davey confirmed his party’s intention to oppose the changes, claiming they could impact around half of all farms.
However, rural Labour MPs appear unfazed by the controversy. One MP representing a predominantly rural constituency dismissed the concerns as “inaccurate scaremongering,” asserting that the £1 million threshold would safeguard smaller family farms. They viewed the move as a testament to the Treasury heeding the voices of these smaller farms, now that Labour boasts a significant number of MPs representing farming and rural communities.
As the dust settles on this contentious budget, one thing is certain: tax advisers will be in high demand. George Dunn, chief executive of the Tenant Farmers’ Association, reported that companies are already advertising inheritance tax planning services to farmers. Will Oliver, a fourth-generation farmer from Leicestershire, stressed the importance of careful planning and having succession strategies in place. “It’s always the elephant in the room in farming,” he remarked.
The full impact of these inheritance tax changes on Britain’s farming community and rural economy remains to be seen. As the debate rages on, policymakers, farmers, and the public will need to navigate the delicate balance between generating much-needed revenue for public services and preserving the viability and heritage of the nation’s agricultural sector.
