Chancellor denies breaking promise on family farm inheritance tax as farmer says change 'could finish us'
31 October 2024, 09:46
Watch Again: Nick Ferrari is joined by Chancellor Rachel Reeves | 31/10/24
Rachel Reeves has denied that hikes on agricultural relief mean she is breaking her promise to farmers, as she claimed the policy targets the 'wealthiest landowners.'
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The Chancellor told LBC's Nick Ferrari at Breakfast that her plan to raise the relief threshold to 18% by 2027 will still protect the majority of farmland in the UK.
Nick asked Ms Reeves to respond to accusations from farmers that she broke "promises you made to them not to hike their inheritance tax" and questioned if she had any knowledge of rural life as an MP in Leeds.
In Wednesday's budget, the Chancellor announced that while there would continue to be no inheritance tax due on combined business and agricultural assets worth less than £1m, above that there would be a 50% relief, at an effective rate of 20%, from April 2026.
Read more: Chancellor admits Budget will hit workers’ pay - as ‘Brits to be left around £300 worse off’
Nick pushes Rachel Reeves to explain how she plans to grow the economy
Ms Reeves said the government is closing a loophole for the "wealthiest landowners", bringing their tax burden more in line with middle class homeowners.
The Chancellor said: "If you are a couple with a home, you can pass a million pounds on tax-free to your children.
"If you have farmland or any land, you, under our plans now, can pass on another million pounds above that first a million pounds allowance tax-free. And then beyond that, there will be inheritance tax.
"At the moment, Nick, you can have some of the wealthiest landowners, not farmers, but wealthy landowners in this country who pay no inheritance tax whatsoever, while middle-class families do. That is not right, and that's why we've closed that loophole."
Ms Reeves also said that the majority of landowners will not be affected by the changes.
She said: "What I would say is that 73% of farms and agricultural property will not be affected at all by these changes. They will pay no more inheritance tax. So this does protect farms.
"So 27% will be affected, but with a discount on inheritance tax of 20% compared to 40% that others pay.
Farmers across the UK have met the news that inheritance tax relief for farms will be limited to £1m with anger.
Henry Ward, a farmer in Lincolnshire, told Nick that he is "filled with worry and dread" over the Chancellor's decision, which he says could lead to a million-pound tax bill for his family.
Mr Ward said: "I farm in partnership with my grandfather, who is 85 years old. He owns the majority of the land that we farm.
"If he dies at the wrong time under this Labour government, we'll be faced with a tax bill of around a million pounds. That could finish us and it's a huge concern."
Ms Reeves announced tax rises of £40 billion on Wednesday, including a £25.7 billion rise in employer national insurance contributions.
Choices made by Ms Reeves will see the overall tax burden reach a record 38.3% of gross domestic product (GDP) in 2027-28, the highest since 1948.
Labour said this did not break a campaign pledge to raise taxes on "working people" - but economists have predicted that companies paying more will likely have a knock-on effect on wages.
Fiscal watchdog the Office for Budget Responsibility (OBR) said average real household disposable incomes would be around £300 lower per person as a result of the Budget.