I’m a farmer – and I’m glad to see tax loopholes closing for cynical investor landowners | Guy Singh-Watson

Should multimillionaire landowners benefit from a tax break designed to help small family farms pass down their land to their children? This is a hotly contested question, given last week's budget. Labour has reintroduced 20% inheritance tax for farms that are valued at more than £1m, meaning the children of farmers will no longer inherit land tax-free. Granted, 20% is still only half of the standard inheritance tax rate, and it probably sounds more than generous to an ex-miner, foundry worker or shipbuilder. But today, £1m would only buy you about 40 hectares (100 acres) of farmland, which is far short of a viable farm.

Farming is a long-term business that requires substantial assets and often makes only meagre returns. Farming families have not had to consider tax planning for family succession since 1992. As a second-generation farmer, I support much of the budget. But on the inheritance tax threshold, I thought, the chancellor, Rachel Reeves, had got it wrong. The positive reading of her decision is that she was trying to close a loophole whereby wealthy people buy up farmland and pass it, tax-free, to their children. If that was the main objective, though, the threshold should have been set substantially higher than £1m.

In most instances, the smallest commercially viable farm is at least 120 hectares (300 acres). If an average land price is £10,000 an acre, then a threshold of £3m would be more appropriate. But then I ran the calculations again. For most farming couples passing on their land and their primary residence to their children, you effectively get this allowance twice. Andy Summers, director at the Centre for the Analysis of Taxation, has shown that for the majority of farms, inheritance tax won't kick in until the £3m mark (or at least £2m). If this is the case, I'd go further and suggest that inheritance tax is payable at 20% for farms worth more than £3m, and then at 30% on farms worth more than £5m and the full 40% for home farms valued at more than £7m.

Given that Reeves wanted to extract some of the £40bn in tax rises needed to rebuild our country from landowners, another way to do this could have been to look at the 10- to 100-fold increase in land values that occurs when that land is granted planning permission. Farmers who benefit from this uplift can pay no tax whatsoever if the funds are "rolled over", ie reinvested in land. Taxing these capital gains could arguably raise more than the current policy, and would probably be far less contentious.

Even so, we should be honest about where the loudest opposition to this policy is coming from. The unintended consequence of the tax break given to landowners has been to inflate land prices and effectively exclude new entrants who don't stand to inherit by making buying your first field unaffordable to most of the people actually doing the farming. Land in the French Vendée – where I have owned a 120-hectare (300-acre) farm for the past 15 years – is less than a 10th of the price of equivalent land in Devon, where I also farm. To be a farmer there, you have to be deemed fit to farm by the local administration. I doubt whether many landowners simply buying up farmland would pass that test. As a farmer of 50 years, I have campaigned vigorously to defend the UK's family farms. It should offend all farmers with mud on their boots that multimillionaire landowners who are helping to make farming less affordable for genuine farmers are claiming to represent us.

According to research based on HMRC data , between 2018 and 2020, an average of £900m in inheritance tax relief went to about 1,300 estates each year. Almost two-thirds of this went to roughly 200 estates a year that each claimed more than £1m in relief, with an average estate valued at £6m. The government's own analysis suggests that 73% of estates with agricultural property won't be affected by the new inheritance tax changes. No one likes paying tax, especially if they have grown used to the privilege of being exempt from it. My views may earn me no friends among my farming peers, but given that most of the benefits of this tax loophole are going to the very richest landowners, closing it seems like a fair change – even if it could have been better designed.

Our country desperately needs investment in its crumbling infrastructure and persistently low productivity. In a nation with ludicrous levels of inequality, and with an ageing population that has shut the door on immigration, it would be a fantasy to think that could be achieved without some people paying more tax. In general, I wish Reeves had been bolder in shifting the tax burden from those who work to those who own wealth. I wish we had gone further in increasing capital gains tax, ideally bringing this up to the same rate as income tax. I would have liked to have seen her at least consider a modest wealth tax on those with assets of more than £10m.

For those who are pushing the hardest against this change to inheritance tax, don't be fooled: they don't represent farmers, they represent the super-rich who don't want to contribute their fair due, and are simply buying up our country to keep more money and assets for themselves.