The UK government’s proposed changes to inheritance tax laws are set to have far-reaching consequences for farmers, food production, and rural communities. While the reforms are presented as a way to clamp down on perceived tax loopholes, critics argue that they will disproportionately harm active farmers and jeopardize the nation’s food security.
The Proposed Changes
The key elements of the reform include:
- Agricultural land relief will provide 100% inheritance tax relief only for the first £1 million of a farm’s value.
- For assets above £1 million, the relief will drop to 50%, resulting in a 20% effective inheritance tax rate on the excess value.
- Payment timelines are extended, allowing taxes to be paid over 10 years without interest, but with a clawback provision that creates uncertainty for families planning generational transitions.
While these changes may seem targeted at wealthy landowners, the reality on the ground tells a different story.
For many farmers, the new policy is another blow to an already struggling industry. Liz Webster, founder of Save British Farming, described the situation as “the straw that broke the camel’s back,” highlighting how farmers have faced mounting pressures for decades.
“This is really, really bad. To me, it feels like a trap,” Webster said. The cumulative effect of low farm-gate prices, rising operational costs, and decades of market consolidation has left many farmers operating on razor-thin margins.
The Financial Reality of Farming
Contrary to public perception, farming is not a highly profitable industry. Many farmers reinvest earnings into machinery, labor, and land just to keep their operations afloat. Consider these costs:
- A combine harvester can cost over £500,000.
- A tractor ranges from £200,000 to £300,000, depending on size.
- Margins often range between 0.5% and 1% of turnover, even for multi-million-pound operations.
“Turnovers might be in the millions, but profits are between 0.5% and 1%,” Webster explained.
The proposed tax changes could force families to sell portions of their farms to cover inheritance tax bills, which creates a cascade of issues.
The Threat to Family Farms
When farmland is sold, it rarely stays in the hands of farmers. Webster noted, “50% or more of the land that gets sold by farmers ends up in the hands of non-farmers.” This trend is particularly troubling because the new owners are often wealthy individuals or corporations who use the land for non-agricultural purposes or tax shelters, further eroding the country’s capacity for local food production.
Journalist Josh Hamilton added, “People will be forced to sell some of the farm to pay the inheritance tax bill. That land will be bought up by someone who is not a farmer because it’s too expensive for new farmers.”
The result is a domino effect:
- Fragmentation of farms: Smaller farms become less viable as they lose economies of scale.
- Reduced food production: With less land under cultivation, the UK’s self-sufficiency in food production declines.
- Increased reliance on imports: The country becomes more dependent on imported food, which often has lower environmental and welfare standards.
Food Security at Risk
The UK’s food supply is already under pressure from global disruptions and domestic challenges. Bad weather has affected key winter produce suppliers like Spain and Morocco, while rising energy costs have forced many UK greenhouses to shut down.
Webster warned, “Food shortages are coming,” adding that the proposed inheritance tax changes would exacerbate the problem by reducing the number of active farms and their ability to produce locally grown food.
In an increasingly uncertain world, reducing domestic food production undermines the UK’s resilience. As Hamilton pointed out, “The most environmentally friendly way to consume food is to consume food as close as possible to where you are.”
A Misguided Policy?
The government has framed the inheritance tax changes as a measure to curb wealth inequality, but critics argue that the reforms will primarily hurt active farmers rather than wealthy landowners.
“Rich people avoid tax by putting it in trust,” Webster explained, emphasizing that the truly wealthy will remain unaffected by the changes. Instead, the burden will fall on the farmers who grow the nation’s food, many of whom are already operating at a loss out of dedication to their land and communities.
The changes risk transforming the agricultural sector into one dominated by industrial mega farms and corporate landowners. This shift would have significant consequences for the environment, rural communities, and public health.
Webster summed up the stakes: “Whether you like farmers or not is by the by. Either we feed you, or the massive corporations feed you. And this is the decision that has to be made.”
