‘Vast majority’ of farmers will not be affected by inheritance tax change, says Environment Secretary

We spoke to Steve Reed, the Secretary of State for Environment, Food and Rural Affairs, and asked him if he understood why farmers were protesting today if, as he says, so few are affected by the changes.

Steve Reed: In order to invest in services that are on their knees, like the NHS, the government has had to take a difficult decision and that was to ask the very wealthiest landowners and the biggest farms to pay a little bit more, to pay their fair share. And we’re doing that. If you look at the figures about who is going to be affected, which seems to be where…

Krishnan Guru-Murthy: We can look at the history and there are…

Steve Reed: This is where the concern has arisen. But the figures the government’s using, they’re based on the last year that we have hard claims data available, which is 2021-22. If you project that forwards, it shows that no more than 500 farms would be affected…

Krishnan Guru-Murthy: Every year?

Steve Reed: Every year. But the vast majority of claimants, of farms who are making a claim, would pay nothing.

Krishnan Guru-Murthy: Yes, but you accept that some farms will be unable to be handed on to the next generation and will be sold off and may or may not carry on farming. You accept that that’s a consequence of this?

Steve Reed: I don’t accept that, I’m afraid. I don’t accept that. Smaller and medium sized farms would be the farms that would not be affected. It would be the wealthiest individuals and the largest farms that would be affected, including actually, those…

Krishnan Guru-Murthy: Define medium sized. How many acres is that?

Steve Reed: But it includes those many… Last year, more agricultural land was bought by non-farmers than by farmers.

Krishnan Guru-Murthy: What do you mean by no medium size farm would have to close?

Steve Reed: This is individuals coming in and buying agricultural land in order to avoid paying their inheritance tax liability, and it’s inflating their values.

Krishnan Guru-Murthy: Say take an example. Suppose you’re hit with a liability on £5 or £6 million worth of land and assets, and you can’t afford that. It’s over £1 million over ten years, and perhaps you’re just not making that kind of money, then you won’t be able to carry on, will you? Now, that’s a very expensive farm when you put it in bold millions…

Steve Reed: Krishnan, you can’t carry on anyway because you’ve died and this is an inheritance going to somebody else.

Krishnan Guru-Murthy: Yes, so your children may not be able to carry on, that’s what I’m saying. So you accept that some farms won’t continue going into the next generation the way they…

Steve Reed: I’m afraid I don’t accept that. But this is all what-ifs isn’t it?

Krishnan Guru-Murthy: They may not make the money. That’s why they’re out protesting, because they’re saying we’re looking at these numbers and saying we don’t think we can make this work and some farms will go to the wall.

Steve Reed: We can speculate all we like. I can create scenarios, you can create scenarios. The one thing that we can rely on…

Krishnan Guru-Murthy: But you’re not refusing to accept that some farms will have to just go, are you?

Steve Reed: The thing we can base this on is hard data. That is the best starting point for this. Now we’ve had the OBR look at this data. We’ve had the Independent Institute for Fiscal Studies think tank look at this data. They all agree no more than 500 farms in any one year would be affected.

Krishnan Guru-Murthy: Yes, but 500 farms will face inheritance tax, that’s the point. And some of them may not be able to afford it.

Steve Reed: They will be able to afford it and they can reduce their liability still further.

Krishnan Guru-Murthy: How do you know they’ll be able to afford it?

Steve Reed: They’ll be able to reduce their liability still further by doing the normal tax planning that any business would do as part of their succession planning.

Krishnan Guru-Murthy: You are saying no farm will be forced to sell off or close as a result of this inheritance tax change? That’s a guarantee?

Steve Reed: If they’re managing themselves properly and doing their tax planning, that is extremely unlikely.

Krishnan Guru-Murthy: Okay. If that’s the aim, then are you flexible on where the threshold is, because you may be wrong?

Steve Reed: Governments don’t announce flexible thresholds. The threshold is there…

Krishnan Guru-Murthy: But you might be wrong, is my point.

Steve Reed: It’s £1 million threshold per person who dies. If there’s multiple owners, that’s multiple millions of pounds plus the usual nil rate at allowances that parents can pass on to their children, which is worth another million. This genuinely is a fair and proportionate approach to dealing with this issue. We have to get the money to help fund the National Health Service, which desperately needs repairing, to stabilise the economy so farmers, just like everyone else, aren’t hit by spiralling rates of inflation and mortgages, as we saw under the previous government. But the vast majority of farmers, of claimants after death, will not be affected by this change.