Challenging: Toby, right, and William Findlay on the march
All the stories I heard last week while marching with the farmers were disturbing. Everyone was desperate to protect their livelihoods and pass on their farms – the backbone of this country – to the next generation. With estates worth more than £1 million no longer exempt from inheritance tax (IHT), some say this will be impossible.
Chancellor Rachel Reeves’ ill-conceived foray means that anyone who inherits a farm worth more than £1 million could face a 20 per cent tax on anything above that amount from April 2026 (although still half the rate of 40 percent paid by other estates). The National Farmers’ Union fears that 75 percent of Britain’s more than 209,000 farms could be affected.
Many people I spoke to say they will have to sell and destroy generations of family farms.
But are there financial solutions? We asked tax experts Mark Levitt, partner at tax, accounting and business consultancy firm Blick Rothenberg, and Sam Dewes, partner at HW Fisher.
WILLIAM FINDLAY celebrated his 40th birthday not with a party, but with a six-hour journey from the family farm near Falkirk, Stirlingshire, to London.
He fights for the survival of businesses such as the 130-acre Strathavon Farm, owned by his 76-year-old father Thomas.
He says, ‘Daddy won’t stop. We keep a herd of a hundred cattle – Limousin and Simmental – and farms like ours should be treated as cornerstones that feed a nation, rather than as easy tax targets.”
Farmland in the Lothians costs around £13,000 per hectare, says estate agent Strutt & Parker. Strathavon Farm with its land, farmhouse and outbuildings is worth more than £2 million.
EXPERT OPINION: There is potential tax relief, a conditional exemption from tax incentives, if a farm is of historic or architectural interest, has land of outstanding natural beauty or of special scientific interest, or is home to objects of historic or artistic interest. This will remove IHT and capital gains tax on these estates.
Levitt says, “If you find ancient burial mounds or remains of a castle, that can satisfy the relief.”
But you will need to set up a heritage maintenance fund of £10,000 or more, managed by a professional manager. You may also have to admit the public at least once a year.
Dewe says another option is to take out a life insurance policy and place it in a trust. Families still pay IHT on your death, but a life insurance policy can pay out a lump sum on death that is outside your estate if held in trust – and can pay any IHT bill.
The option is not cheap and would cost farmers like Thomas thousands of pounds a month. However, a 50-year-old could pay £1,250 a month on an amount of £1.4 million written into a trust.
You can also put your farm in trust and leave the estate to your surviving relatives in the event of your death. Levitt says: ‘Setting up such a trust can cost £2,000 to £5,000, but you will have to pay 3 per cent of the value of the estate every ten years.
‘So a trust that owns a farm worth £10 million and assumes this is still the value after the first ten years would have to pay an IHT charge of £300,000, which equates to £30,000 per year.’
ANNABEL WITBY34, is a fourth-generation Warwickshire sheep farmer with a flock of 450 North Country Mules on the 300-acre Brookfields Farm owned by her father Mike Green, 72. He was unable to protest due to hip surgery – but still couldn’t be kept from his tractor.
Annabel has two sisters and hoped to one day take over the farm for her sons George, four, and six-month-old Charlie. But this dream has been destroyed by Labour. Annabel says: ‘How am I supposed to buy out my sisters? What we earn is plowed back to the farm.
“I run a side business for dog groomers for extra money. This tax bill will close our farm.”
Based on figures from estate agent Knight Frank, an acre of pasture in Warwickshire was £7,920 two years ago, meaning the land could be worth £2.4 million. Including a farmhouse and outbuildings, the total value of Brookfields Farm is well over £3 million.
EXPERT OPINION: Farmers need to think about succession planning, including giving away part of their farm to the next generation now.
Levitt says: ‘You have to live for seven years after giving away the farm to avoid IHT. And if you still live in the farm, complications may arise due to the ‘reservation of benefit’ gift rule: you can continue to enjoy the property while you are still alive. This could be taxable.
“But if those who are going to inherit already share the property, there may be nothing to worry about.” Dewe proposes that residents pay rent to the new owner who left the property to avoid tax problems.
Speaking out: the farmers’ banner at the protest outside Parliament
LUKE MAYO36, and Caroline Howells, 35, have 8,000 free-range poultry on their farm in Dorset. They took their two-year-old son Ruben with them to the demo.
Luke is a fifth-generation farmer on the 125-acre Friar Waddon House farm, which is also used for growing hay, raising cattle and sheep. He says: ‘Our country was valued at £1.5 million 15 years ago so that this tax could bankrupt the next generation.’
He adds: ‘The only people who will make money from this vindictive new tax are developers who take land that farmers are forced to sell.’
EXPERT OPINION: Dewe says increasing the number of farm owners could increase the IHT threshold – which for this couple could mean tying the knot. He says: ‘A married couple who jointly own a farm can split it in two – and thus qualify for £2m of agricultural property relief.
This is in addition to the £1 million inheritance tax limit that all married couples face when leaving a property to a direct descendant. It means you could have a limit of £3m before you pay tax.”
Levitt says farmers like Luke should make the most of the Agricultural Property Support (APR), capped at £1 million. For Luke, this includes land used for animal grazing and keeping chickens, as well as farm buildings and the farm.
Levitt says Commercial Property Lighting (BPR) can be used for machinery and any farm shop.
You can combine agricultural property remission (APR) with commercial property remission (BPR) up to an individual limit of £1 million.
The government says farmers have ten years to pay IHT. Other estates have only six months.
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