Rachel Reeves’s proposed modifications to agricultural reduction on inheritance tax—dubbed the “tractor tax”—might influence 5 occasions extra farmers than the federal government has estimated, based on the Central Affiliation of Agricultural Valuers (CAAV).
The Treasury has acknowledged that the modifications will have an effect on roughly 500 farmers annually. Nonetheless, Jeremy Moody, secretary and adviser to the CAAV, argues that this determine is inaccurate on account of a misunderstanding of the farming trade’s complexities. He asserts that the brand new measures will truly influence round 2,500 farmers yearly.
Moody contends that the Treasury’s evaluation overlooks farmers who solely declare Enterprise Property Reduction (BPR) and never Agricultural Property Reduction (APR). This consists of people who personal land however not the farmhouse, these in farming partnerships, tenant farmers with out possession of land or buildings, and farmers who’re shareholders in household corporations.
“They’re flawed as a result of they’re engaged on an incomplete image,” Moody mentioned. “What they received flawed is, they didn’t know what to ask and HMRC couldn’t reply them even when they’d.”
He estimates that over a era, about 75,000 farms will probably be affected by the modifications.
At present, farmers can declare as much as 100% reduction on inheritance tax for his or her land and buildings by way of APR and for operational tools and livestock by way of BPR. Ranging from April 2026, solely the primary £1 million of their mixed land and enterprise property will qualify for 100% reduction beneath the brand new guidelines. Any quantity above this threshold will probably be topic to inheritance tax at an efficient price of 20%—half the usual price of 40%.
The federal government argues that farmers can successfully have a nil-rate tax band of £1.5 million every, permitting a married couple to go on as much as £3 million in property tax-free. This calculation consists of private inheritance tax allowances. Nonetheless, Moody disputes this, stating that these thresholds are private and shouldn’t be utilized to enterprise property.
“That appears to me to be principally flawed,” he commented. “In the event you’re throwing all that in opposition to the farm then truly what you’re doing is saying your entire private results will probably be taxed at 40%.”
The BBC Confirm fact-checking service has supported the Treasury’s estimates, and the federal government has publicized this evaluation. Sir Keir Starmer remarked, “All of you’ll be able to take a look at what which means when it comes to the influence. I feel the BBC has already performed it.”
A authorities spokesperson acknowledged: “Our dedication to our farmers is steadfast—we now have dedicated £5 billion to the farming funds over two years, together with extra money than ever for sustainable meals manufacturing… Now we have been clear since this variation was introduced that round 500 claims of Agricultural and Enterprise Property Reduction annually will probably be impacted… It’s not potential to precisely infer inheritance tax legal responsibility from farm web price figures as there are totally different circumstances affecting every farm.”
Moody criticises the federal government’s and BBC’s analyses for not totally understanding the farming trade, resulting in underestimations of the coverage’s influence. He emphasises that many farmers, similar to tenant farmers, might not profit from sure tax allowances and that the modifications may considerably have an effect on their monetary standing.
