Rachel Reeves has eased inheritance tax on agricultural property after pressure from farmers.
As the Chancellor gave his Budget speech on Wednesday, the Treasury announced the changes, which it said could save £30m next year and £70m a year over the next four years while transferring assets to farmers and business owners. The farmers, who had brought tractors to the doors of Parliament, were protesting outside at the same time.
From April, farmers and small business owners who are married, in civil partnerships or whose spouse has died will be able to transfer the full relief amount of up to £1m of their inheritance tax allowance to each other if one of them dies without using their allowance. The changes mean a farmer can leave his £1m allowance to his partner, and use his own £1m allowance to pass £2m of farmland to his children without paying inheritance tax.
The Chancellor’s announcement in last October’s Budget that she was bringing farms and other agricultural property into inheritance tax rules to raise money for public services and closing tax loopholes exploited by some wealthy landowners prompted mass protests.
Farmers drowned out ministers’ speeches with tractor horns after Reeves said she was ending decades of exemptions for farms and requiring heirs to pay 20% of the value of agricultural and commercial property above £1m.
On Wednesday morning, ahead of the Budget, farmers defied police restrictions and parked more than a dozen tractors around Trafalgar Square and protested at Whitehall over a range of issues including inheritance tax. Many people were arrested.
David Gunn, an arable farmer and agricultural contractor from near Sevenoaks in Kent, said his message to Labor was: “You said in the manifesto you would look after farmers, which you have absolutely not done, you have ruined the countryside.”
Tax expert Dan Needle said the Chancellor had made a “sensible change” that means farmers will not need to take extensive long-term tax planning measures.
Tom Bradshaw, chairman of the National Farmers Union, said: “It is good to see the Government admit that its original proposals were flawed. But this change is not enough to address the devastating impact of the policy on farming communities.”
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He said the change would help widowed farmers but “it does nothing to ease the burden on the elderly and vulnerable” and urged the government to address it with further measures.
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