Environment Secretary Steve Reed says farmers are 'happily' wrong about how many farms affected by inheritance tax
Farmers are protesting in Westminster today after Chancellor Rachel Reeves announced in the budget last month that 20% inheritance tax will be charged on farms worth over 拢1m, a policy that Mr Reed said a Labour government would not adopt.
Tuesday 19 November 2024 18:00, UK
Environment Secretary Steve Reed has said farmers are "happily" wrong about how many farms will be affected by the inheritance tax rise - and should contact a tax adviser to see how they are.
More than 13,000 farmers descended on Whitehall on Tuesday to protest the introduction of a 20% inheritance tax on farms worth more than £1 million from April 2026, as announced in the budget last month.
The government has said only 500 out of the UK's 209,000 farms will be affected, but the National Farmers' Union (NFU) said the real number is two thirds of farms, while the Country Land and Business Association (CLA) said 70,000 farms would be affected.
But, speaking at a cross-party parliamentary committee as farmers protested outside, Mr Reed dismissed those numbers as he said the Treasury had taken into account all possible figures, and their numbers have been verified by the Office for Budget Responsibility (OBR) and the Institute for Fiscal Studies (IFS).
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He said: "Assuming these projections from HMRC, validated by the OBR, on their effects are correct, then many of them probably, happily, are wrong because there are things that they can do to plan their tax affairs as most businesses or asset owners would do to limit their liability."
The environment secretary advised "the best thing to do is for people to take professional tax advice and manage their tax affairs appropriately".
He also suggested farmers should hand over their farms to their children seven years before they die to avoid inheritance tax entirely.
Mr Reed's comments came as he admitted he had changed his stance after telling two farmers' conferences a year ago, when he was shadow environment secretary, Labour had no plans to change inheritance rules, including Agricultural Property Relief (APR), which gives them a 100% exemption.
There was no mention of inheritance tax for farmers in Labour's manifesto.
"We inherited a £22bn black hole from the previous government, and the previous chancellor of the exchequer covered the scale of that problem up," he said.
"So none of us knew how difficult the problem would be when we were coming into government."
He said it is "only right" to ask the "wealthiest landowners and the biggest farms to pay their fair share".
The National Farmers' Union (NFU) and the Country Land and Business Association (CLA) both reported in November and December last year Mr Reed had ruled out scrapping inheritance tax relief for farmland.
Asked at the CLA conference if he intended to get rid of the tax break, Mr Reed said: "We don't. We have no intention of changing APR."
He also told the National Farmers' Union (NFU) he would not be changing APR.
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Asked if Mr Reed had told the NFU that, the group's president, Tom Bradshaw, told Sky News: "He did. He stood here a year ago at a conference in London, and said that the government would not be changing agricultural property relief.
"This industry has been betrayed."
Labour have said they are imposing the tax because wealthy landowners are using APR to avoid paying inheritance tax.
Downing Street maintained on Tuesday the changes to inheritance tax are "balanced and proportionate".
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The government and farmers have been engaged in a row over how many farms would be affected, with the Treasury saying 73% of farms would not be included, based on past claims.
However, the NFU said the Treasury has not included business property relief (BPR), which farmers can also currently claim, and two thirds of farms will actually be affected.
Mr Reed told the committee the Treasury had included BPR in their calculations.
Conservative Party leader Kemi Badenoch pledged to reverse the tax if her party gets into power.
"We know how this tax will destroy your way of life," she said at the farmers' protest.
"This policy is so obviously unfair, so obviously cruel, and we will do everything we can - if they do not U-turn now - to reverse this tax."
Shadow environment, food and rural affairs minister Victoria Atkins told Sky News: "What worries us is that, in the way that this policy has been designed, it will have the exact opposite effect of what they're trying to achieve.
"It is tenant farmers and farmers in the middle who are going to be broken by this."