Rachel Reeves hasn’t done her homework again – and it’s decimating the beating heart of Britain
Chancellor Rachel Reeves's move to make family farms liable for the death tax has unleashed a chorus of disapproval not just from farmers, but anyone with an interest in preserving our countryside as we know and love it.
Also rushing to the defence of the farming community are those concerned about the quality and food security of what we eat – and those who see the tax change as yet another assault on family autonomy and self-sufficiency.
In support of Ms Reeves are those who voice their contempt for people who work hard to add value that builds up wealth and have the cheek to want to pass it on to their offspring.
Others think it's simply unfair that family-run farms and businesses have some protection from the ravages of a tax that has not seen its threshold uprated in line with property values since the last Labour government in 2010.
The result has been a hailstorm of competing claims and statistics about who really will face losing the family farm and what it will mean to our green and pleasant land that looks so pretty to viewers of Countryfile, but is the vital heartbeat that courses through the nation.
When Ms Reeves made her Budget statement, her words were quite precise: "From April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all – but for assets over £1m, inheritance tax will apply with 50pc relief, at an effective rate of 20pc."
She went on: "This will ensure we continue to protect small family farms – and three-quarters of claims will be unaffected by these changes."
Having previously broken the promises Labour gave to pensioners that the winter fuel allowance was safe with them, and having said that National Insurance contributions would not rise – only to force employers to pay more – the words of Ms Reeves were yet again found wanting.
It did not take long before statistics were being circulated by Labour supporters showing how, based on past applications for agricultural property relief, fewer than 30pc of farms would likely be affected.
Unfortunately for Ms Reeves, these numbers did not survive the first contact with reality. How could they – they did not represent the truth about the nature of Britain's real farming community.
Farmers and their representatives, who had been promised by Labour the allowance would not be changed, were astonished the threshold was set only at £1m.
Within days, Ms Reeves had to do media rounds announcing the threshold would in fact be £2m because the spouse's allowance could be transferred and other allowances could add another £600,000.
Unfortunately, divorce is a fact of life even for farmers (the UK divorce rate is 43pc of marriages). If a farmer divorces his or her spouse, there would be no transfer of allowance and the threshold would be £1.325m. Even then, the £2.65m allowance would still not be enough when transferring to children.
Ms Reeves has clearly not done her homework. While Treasury figures suggest only 27pc of farms would be liable for inheritance tax, the more accurate Defra figures suggest it will be 66pc that will be hit.
The difference comes about because the Treasury numbers used past claims for agricultural property relief, but these included many small-holdings, pony paddocks and often unviable farms that exist as a desired lifestyle choice for hobby farmers, but want to avoid the death tax.
The typical family farms that have been built up over generations, invested with blood, toil and huge bank loans to produce significant amounts of food, easily pass the threshold of inheritance tax.
The Defra statistics breaking down the number and size of UK farms show that 46pc are smallholdings below 50 acres, whereas the average size of a UK farm is 217 acres.
Every farm is unique and while these smaller farms form part of the statistics, and will also provide family homes, they are not representative of the core farming businesses that feed the country.
The beating heart of British farming lies in farms of over 100 acres and when the farmhouse, barns, tractors and associated machinery, produce, livestock and working capital are all added to the value, the inheritance will easily exceed a threshold of £2.65m.
Here are some examples of what farms currently on the market look like across the UK.
In beautiful Angus, resting between Aberdeen and Dundee, an arable farm of just over 600 acres, including its farmhouse and a couple of barns, is under offer for £6.75m, after being nurtured for three generations totalling almost 100 years by the family now selling it.
In Nottinghamshire, a former dairy farm now supporting arable farming, of only 157 acres, including its farmhouse and supporting buildings, is commanding an offer price of £3.5m. It has been in the same family since 1941.
Another multi-generational farm this time suitable for cereals and located in Cambridgeshire is again below the average farm size at 199 acres yet is under offers for £3.25m including farmhouse and outbuildings.
What these examples show, and there are many more like them, is that even farms well below the average size will cross the threshold and the Treasury estimates do not stand examination.
The result will be that typical family farms will have to be sold to larger businesses that can afford to take on a mortgage, or property developers looking to switch to housing, solar and wind farms. The only other way for a family to retain the farm will be to sell some of the land or the farmhouse to meet the inheritance tax bill.
One argument that Ms Reeves's supporters level is that wealthy city-types are buying up farms to try and avoid the death tax, but this only serves to illustrate the futility of inheritance taxes.
Currently raising only £6bn and projected to rise to £7.5bn following Reeve's changes – less than 1pc of the UK's £829bn tax revenues – it would make more sense to abolish that tax altogether, as many countries have already done.
This would stop distortions of the economy where people purchase assets to shelter themselves from tax, driving up prices for farmland that makes it harder for young people to take on a farm.
It would also attract more taxpayers to stay in the UK and pay their taxes here rather than Dubai, Switzerland, Monaco, the United States or countries without inheritance tax.
The sad truth is that for politicians such as Ms Reeves and Sir Keir Starmer, the issue is not about finding the funds to save the NHS, it is about redistributing wealth, even if it means breaking up family assets that have taken generations to build and undermines the personal drive of wealth creators to build a legacy for the family they will leave behind.
It will not be enough to raise the threshold for agricultural property relief, even if it is tripled to £3m. There should be no need for relief because there should be no death tax – and were a political party to actually propose its abolition it would attract a great deal of support.
