British farmers and the autumn budget

Answer

The protests

More than 10,000 members of the farming community, young and old, descended on Westminster on 19 November to show their anger over reforms announced in Rachel Reeves’ autumn budget.

Why were the farming community protesting?

The principal reason for the uproar from the farming community is the proposed change to Inheritance Tax (IHT), which will affect family farms.

Previously, British farmers were exempt from paying IHT on their farms following the 1992 Agricultural Property Relief (APR) scheme. However, the chancellor has proposed that as of the 6 April 2026, 100% relief will be available only on the first £1 million of combined agricultural and business property (applied proportionally across the qualifying property), and will be 50% relief on inherited farm assets over £1 million, effectively a 20% tax rate.

Farmers see this as the death of the family farm, often being passed from generation to generation.

This is on top of the various other tax increases proposed in the budget, including an increase in employer’s national insurance contributions and a rise in the minimum wage, all of which impact significantly labour-intensive farms. In addition, farmers have also seen dramatic reductions in already declining farm subsidy payments this year with more to follow.

Why does the UK government want to tax farmers more?

The Labour government argues that it has to plug a £22 billion hole in public finances and therefore needs to generate funds for public services, such as the National Health Service (NHS). It argues that farmers should play their part. It also argues that wealthy individuals have been using APR to reduce their exposure to tax, which isn’t what APR was intended for. The government wants to close what it sees as a loophole.

In a joint statement, Reeves and the Secretary of State for Environment, Food and Rural Affairs Steve Reed said: “Farmers are the backbone of Britain, and we recognise the strength of feeling expressed by farming and rural communities in recent weeks. We are steadfast in our commitment to Britain’s farming industry because food security is national security… But with public services crumbling and a 22 billion fiscal hole that the government inherited, we have taken difficult decisions.”

The figures

The Treasury has insisted that only a minority of British farms, namely 28%, will be affected by the new IHT rules. However, these figures are strongly disputed by the farming community.

The National Farmers’ Union of England and Wales (NFU) states that even based on figures by the government’s own Department for Environment, Food and Rural Affairs (Defra), 66% of the UK’s 209,000 farms are worth more than £1 million and, as such, will have to pay IHT.

Reports suggest that the Treasury based its figure on past claims for APR, without taking into account farming assets claimed under Business Property Relief (BPR) – another scheme that provides relief from IHT. Crucially, because the £1 million limit to the 100% relief applies to both APR and BPR, the NFU contends that the Treasury has vastly underestimated how many British farms this reform will impact.

Reaction from the farming community

The British farming community is deeply concerned, with many fearing that the IHT reform sounds the death knell of the family farm in the UK. Many farmers are concerned that those inheriting the farm will be forced to sell it to meet the IHT liability. This is because while the farmers may be asset rich in terms of the land, they can be cash poor and, generally, farming businesses don’t generate significant profits, particularly when compared to the value of the land.

Jeremy Moody of the Central Association of Agricultural Valuers (CAAV) wrote in a CAAV e-briefing: “For ministers to see an APR claim as the sum total of a farm is to miss the point that APR is only about land and buildings, leaving machinery, livestock, deadstock, other farming assets and diversified activities for BPR… The lack of data given for BPR claims is concerning when we seek an informed debate.”

The government response

The Labour government has so far resisted calls from the farming community and, in particular, the NFU and Country Land and Business Association, to scrap the reform. Speaking from the G20 summit in Rio de Janeiro, Prime Minister Keir Starmer said he’s “very confident that the vast majority of farms will be totally unaffected” and that the policy will not be reversed. He emphasised that £5 billion had been pledged over two years for “farming and food sustainability”. However, there are murmurings that some form of exemption could be available for landowners over the age of 80, who otherwise might not have time to properly structure a generational handover due to the implementation date.

Una Foy is a trainee solicitor at Birketts LLP.