Farmers Protest New Inheritance Tax Policies
- TBA
- Mar 19
- 4 min read
On 10 February, the streets of London witnessed a large-scale protest. Thousands of farmers drove approximately 2,000 tractors into Westminster to voice their strong opposition to the Labour Party's plan to impose an inheritance tax on farms.
The trigger for this protest was a new inheritance tax policy proposed as part of Labour’s fiscal strategy. The policy plans to levy a 20% inheritance tax on farms valued at over £1 million (or £3 million in some cases).
For farmers who have been running family farms for generations, this policy comes as a heavy blow. Many fear it will force them to sell off land inherited from their ancestors in order to pay the high tax bill, ultimately leading to the collapse of family-run farms and posing a threat to the UK’s food security.
Since Labour released its first Autumn Budget after taking office, debates over its tax policies have been ongoing.
This is not the first time farmers have taken to the streets in protest. On 11 December 2024, thousands of farmers and hundreds of tractors flooded central London, carrying banners with slogans such as ‘No Farmers, No Food, No Future’ and ‘Save British Farming’ using the most direct approach to express their dissatisfaction with the government.
British Farmers and the Government’s Battle Over Inheritance Tax
Since the 1990s, British farmers have enjoyed inheritance tax exemptions on agricultural assets. However, under the latest fiscal regulations, from 6 April 2026, agricultural assets worth over £1 million will be subject to a 20% inheritance tax. Many see this as a ‘betrayal’ of farmers.
Some may wonder how farm assets could exceed £1 million so easily. It is important to note that the policy clearly states that the valuation includes not just farm income but also agricultural machinery, such as tractors, harvesters, and trailers.
In reality, the total value of agricultural equipment on most farms already exceeds £1 million, making the vast majority of farms liable for the inheritance tax.
Many farmers worry that if the law is implemented, they will have no choice but to sell land to pay the tax, gradually losing their status as farmers, a role that has defined their families for generations. If that happens, who will be left to sustain British agriculture?
Meanwhile, Chancellor Rachel Reeves has assured farmers that the expanded inheritance tax revenue will be used to fund the NHS. The NHS, established in 1948, is the UK’s national healthcare system providing free and comprehensive medical services to all residents.
However, farmers are not convinced by this explanation, with many believing that the increased tax burden is merely an attempt to plug the £21 billion financial deficit left by the previous government.
On 16 November last year, Prime Minister Keir Starmer delivered a speech at the Welsh Labour Conference, where dozens of farmers drove their tractors straight from their farms to protest in the cold wind and rain. Starmer, however, did not appear and instead exited through the back door after the conference ended.
On 19 November, another large-scale protest was launched, with around 40,000 farmers gathering in Westminster to protest the tax reforms.
On 10 February, British farmers once again drove their tractors en masse into Westminster, making this the largest protest to date.
Tips for Managing Agricultural Inheritance Tax
Following the inheritance tax reform, British farmers are facing a greater tax burden, especially those who own high-value farms and agricultural land. How can farmers manage these high taxes to ensure their farms can be successfully passed on to the next generation? This issue has sparked extensive discussions online. Here are some of the most popular strategies:
1.Utilising Agricultural Property Relief (APR)
Agricultural Property Relief is a tax relief policy provided by the UK government that allows eligible agricultural assets to receive either 50% or 100% inheritance tax relief.
Farmers must ensure their land is actively used for agricultural purposes, such as farming or grazing, and that they meet the required ownership or usage period (at least two years for ownership or seven years for usage). Proper planning can help farmers incorporate most of their farm assets into APR exemptions, significantly reducing inheritance tax liabilities.
2.Business Property Relief (BPR)
If a farm operates as a business rather than merely an asset, it may qualify for Business Property Relief, which offers 50% or 100% inheritance tax relief.
Farmers should ensure their farms are run as businesses and keep detailed financial records. By aligning farm assets with commercial activities, farmers can further reduce inheritance tax.
3.Setting Up a Trust
A trust is a legal arrangement allowing farmers to transfer farm assets into a trust, managed by trustees and designated for beneficiaries (such as their children or heirs).
By establishing a trust, farmers can transfer assets before death, thus reducing the taxable estate. Certain types of trusts, such as "Life Interest Trusts," may offer tax benefits. However, setting up a trust requires expert legal and tax advice to ensure compliance and optimise tax savings.
4.Gifting Strategies
Farmers can gift farm assets to heirs during their lifetime to reduce the taxable estate.
Annual Gift Exemption: Each individual can gift up to £3,000 per year tax-free.
Seven-Year Rule: If the donor lives for seven years after gifting assets, the gift becomes entirely tax-free.
Gifting Agricultural Assets: Gifts of agricultural property may qualify for additional tax relief, especially if they meet APR or BPR criteria.
5.Paying Inheritance Tax in Instalments
The UK tax system allows farmers to pay inheritance tax in instalments, particularly when the estate primarily consists of agricultural or business assets.
Farmers can choose to spread payments over ten years, paying 10% annually plus interest, providing more time to gather funds and avoiding the need for an immediate sale of assets.
6.Diversifying Farming Income
Farmers can expand income streams to increase cash flow and manage potential tax burdens.
Developing agritourism, such as farm shops or restaurants.
Selling produce directly to consumers for higher profit margins.
Leasing land for renewable energy projects, such as solar or wind farms.
Some Advice from TB Accountants
Inheritance tax planning involves complex legal and financial matters, making expert advice essential.
Tax professionals can assist farmers in:
Assessing asset structures and tax risks.
Creating long-term estate planning strategies.
Ensuring compliance with tax laws and avoiding potential legal issues.