Labour hitting farms with inheritance tax hike (pictured James Mackellar who will be impacted) (Image: SKY NEWS/JONATHAN BUCKMASTER)
Rachel Reeves is facing an angry backlash for making one of the “most outrageous and short-sighted moves in this Labour Budget”.
Farms worth more than ￡1million will no longer be exempt from paying inheritance tax when passing on landholdings to family members under new plans announced in the Budget today.
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They were previously given a tax break under Agricultural Property Relief (APR) – a policy specifically designed to protect family-run farms by reducing the tax burden on them so they do not have to sell their main income source to pay the bill.
It comes after the Daily Express reported on fears Labour would hit family-run farms in the Budget, with small business owner in Buckinghamshire James Mackellar telling us he feared Labour’s inheritance tax plans could be a “massive problem”.
Now, Shadow Environment Secretary Steve Barclay has suggested Labour went back on its word not to hit farmers in the Budget.
Responding to today’s announcement, he said: “Before the election, Defra Secretary Steve Reed said: ‘We have no intention of changing APR’.
“When we warned Labour would he claimed that was ‘desperate nonsense’.
“Now the Chancellor has just confirmed Labour will cut Agricultural Property Relief for thousands of farms.”
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Rachel Reeves unveiled her Autumn Budget today (Image: Getty)
Reacting to today’s news, Greg Smith, the MP for Mid-Bucks, said: “Devastating for farming. Devastating for Buckinghamshire.
“One of the most outrageous and short-sighted moves in this Labour Budget.”
Simon Hoare, MP for North Dorset, said: “Devastating news for the small family farms of North Dorset.”
Meanwhile, Shadow Business Secretary Kevin Hollinrake said: “Effective abolition of Business Property Relief and Agricultural Property Relief and introduction of 20% Inheritance Tax rate will decimate private family businesses and farms.
“Disastrous move will effectively nationalise companies and farms who haven’t got cash to pay the tax.”
National Farmers’ Union (NFU) President Tom Bradshaw was equally scathing, saying the Budget “threatens family farms”.
He said: “It has been a disastrous Budget for family farmers and especially tenant farmers.
“The shameless breaking of clear promises on Agricultural Property Relief will snatch away the next generation’s ability to carry on producing British food, plan for the future and shepherd the environment.”
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Family-run farms face a new tax bill under Labour plans (Image: Getty)
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He went on to say that it was clear the government did not “understand, or perhaps care, that family farms are not only small farms, and that just because a farm is a valuable asset, it does not mean those who work it are wealthy”.
He added: “This is one of the number one measures in the Budget which makes it harder for farmers to stay in business.
“Before the election, Keir Starmer promised to establish a new relationship with farming and the countryside. Well, he’s certainly done that.”
Former Lib Dem leader Tim Farron agreed with the NFU President’s fears for tenant farmers – but warned his party would “strongly fight” against what he described as Labour’s “disgraceful act”.
He said: “The victims of the Chancellor’s Agricultural Property Relief changes will be hardworking tenant farmers.
“[Reeves] is incentivising large landowners to enact new clearances. She must surely have known this? We will strongly fight this disgraceful act.”
And Joe Evans. Vice President of the Country Land and Business Association (CLA). said: “Anxious times sitting alongside my colleagues at The CLA watching Rt Hon Rachel Reeves deliver her Budget.
“We await full details on the Defra spending, but the overarching theme of Labour abandoning its assurance to not tamper with inheritance taxes feels like nothing short of a betrayal.
“It flies in the face of encouraging investment in rural Britain. Our initial estimates suggest that the capping of agricultural property relief at ￡1m could harm 70,000 UK farms, damaging family businesses and destabilising food security.
“In its attempts to raise more revenue the Government will cause great damage, jeopardising the future of rural businesses up and down the country.
“We are geared up to make robust representations on behalf of all members of the CLA. Watch this space.”
Labour has pointed out the farming budget will be ￡2.4billion in 2025/26.
A source said: “This will include the largest-ever budget directed at sustainable food production and nature’s recovery in our country’s history: ￡1.8billion for environmental land management schemes to boost Britain’s food security and accelerate the transition to a more resilient and sustainable farming sector.
“We are prioritising directing investment to environmental land management schemes, which will boost nature and sustainable food production. Environmental Land Management schemes will remain at the centre of our offer for farmers.”
The Labour source added: “A further ￡70million in 2025-26 will be allocated to support nature’s recovery while delivering much-needed infrastructure and housing.
“This includes ￡14million to establish a new model for developer contributions to strategically address the environmental impact of development, and ￡13million to expand Protected Sites Strategies in priority areas.
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“In a challenging economic context, we will also look to other, innovative ways to deliver for nature.
“This includes through regulation and building on the UK’s leadership in green finance to mobilise private capital and grow nature markets.
“We are clear that delivering our environmental targets, alongside net zero, underpins sustainable, economic growth.”