Estimates vary, but on 19 November 2024, around 20,000, or maybe more, angry, yet peaceful and orderly, British farmers converged on a rainy central London to express their displeasure at Autumn Budget proposals to impose a 20 per cent inheritance tax (half of the standard rate of 40 per cent) on agricultural assets worth more than £1 million from 6 April 2026 onwards.
On the day, the National Farmers’ Union (NFU) organised a ‘mass lobby’ at Church House Conference Centre in Westminster from 9 AM onwards, where 1,800 union members met with 165 constituency MPs from all political parties to discuss their concerns. An independent rally, organised by several prominent farmers and led by children on tractors, then started out from Richmond Terrace in Whitehall at 11 AM for Parliament Square, before returning to Whitehall to listen to Jeremy Clarkson, Conservative leader Kemi Badenoch, Liberal Democrat leader Sir Ed Davey, and NFU president Tom Bradshaw express their outrage at the Labour Party’s Budget proposals. Mr Clarkson, TV presenter and “lifestyle farmer”, was particularly compelling as he addressed the admiring crowds and requested the government to reverse the inheritance tax on farmers. The peaceful rally was marked by large numbers of participants sporting green and brown Barbour jackets, flat caps, woolly hats, and Wellington boots-in keeping with their countryside origins-as well as many pedigreed canine companions. Among the placards and banners on display were the slogans “No Farmers No Food No Future” and “Fight the Tax Save Our Farms. Some referred to “Starmer Farmer Harmer” in a play on the name of Prime Minister Sir Keir Starmer, while others were decidedly rude and not worth repeating.
Since 1992, farmers have been exempted from inheritance tax under Agricultural Property Relief (APR), which covers agricultural or pastoral land and farm buildings, and Business Property Relief (BPR), which covers livestock, farm machinery, harvested grain, and diversified activities (camps on farmland, farm shops, holiday cottages). This new levy can be paid in interest-free instalments over ten years. APR and BPR will from now on be combined in a single £1 million allowance, which rises up to nearly £3 million when both partners in a couple combine their tax-free allowances along with the usual inheritance tax relief of £325,000 each. According to the government, its proposals will only affect around 500 farms a year-a figure which has apparently been “validated” by the Office for Budget Responsibility and by the Institute for Fiscal Studies. Furthermore, it claims that much agricultural land has been acquired by private or institutional investors for tax avoidance and other non-agricultural purposes, thereby reducing the supply of arable land and pushing up land prices. Critics claim that the government has overvalued many estates, and the actual number of liable agricultural estates is much higher-as much as 70,000 farms, according to the Country and Land Business Association. Figures from the Department of Environment, Food, and Rural Affairs (DEFRA) indicate that 66 per cent of farms are valued at over £1 million.
Currently, agricultural land occupies 17.2 million hectares, or 71 per cent of total land area, and provides around 60 per cent of the UK’s total food needs. According to DEFRA, as of 1 June 2024, the utilised agricultural area is 8.7 million hectares, 57 per cent of which is croppable area (arable crops, horticultural crops-fruit and vegetables, temporary grassland), while permanent grassland accounts for an additional 38 per cent. Agricultural land valuation involves appraisal of a property based on its agricultural productivity and depends on location, topography, surroundings, soil quality, susceptibility to flooding, and other factors, including supply and demand. Calculation of inheritance tax liability will require the input of agricultural valuers, surveyors, accountants, and lawyers, adding layers of administration in the process of land and asset valuation.
Many British farmers operate in unenviable circumstances. High fertiliser, seed, machinery, energy, and fuel costs, coupled with high feed and welfare (including veterinary bills) costs for livestock are not adequately compensated for by farm incomes, which have been compromised by cheap imports, inadequate and misdirected post-Brexit subsidies, pressures from supermarkets to keep prices low, barriers to trade with the EU, and climate change. Farming is hard work, seven days a week, and can be poorly recompensed. The Return on Capital Employed (ROCE) is overall low, with some notable exceptions. According to DEFRA figures, updated on 14 November 2024, the median ROCE of farms in England was 0.5 per cent in 2022/23, a fall of 0.5 percentage points compared to 2021/22. Overall, 45 per cent of English farms had a negative ROCE in 2022/23, and were not achieving an economic return to the capital employed.
Farming is unlikely to attract many new recruits at a time when work-life balance is often an overriding consideration in choice of career. Some farms are multi-generational family outfits, and it seems that the new inheritance tax proposals are likely to disincentivise intending farmers from continuing in the ancestral business. Taxing illiquid agricultural assets, whose value is not directly linked to agricultural productivity, rather than profits, risks heirs having to sell farms to cover their inheritance tax liabilities. Given the available facts and the limited gains to the Treasury from inheritance tax increases for farmers, the government’s proposals for a “tractor tax” seem counterproductive and risk alienating the all-important farming community and compromising food production- to everyone’s detriment.
Ashis Banerjee.