Liberal Democrats Propose Inheritance Tax Exemption for “Working Farms”

The Liberal Democrats have urged the government to exclude “working farms” from its proposed inheritance tax changes. According to measures revealed in the Budget, agricultural properties inherited with a value exceeding £1 million will face a 20% inheritance tax starting April 2026, a change from their previous exempt status. A higher limit of £3 million applies to married couples or civil partners transferring their farms. These proposals have generated significant opposition from farmers. However, the Labour party contends that this alteration is necessary to deter individuals from evading tax through the acquisition of agricultural land. During discussions in the House of Commons, Tim Farron, the Liberal Democrat spokesman for rural affairs, stated that implementing a “working farm qualification exemption” would ensure the policy specifically addresses tax-avoiders. Farron, who serves as the representative for Westmoreland and Lonsdale in Cumbria, remarked: “Farmers are struggling, often with their mental health.” He continued, “The isolation you feel when you are farming, and you have farmed a valley, let’s say, for generations and your family have, and you might be the one who ends up losing the family farm, it’s utterly, utterly devastating.” Farron added that permitting “not active farmers to be under the HMRC microscope instead” would be considerably better than the current situation. The Treasury projects that approximately 500 estates annually will incur inheritance tax due to these revisions. Nevertheless, advocates suggest that as many as 75,000 farms across the UK could experience the impact. James Murray, a Treasury Minister, asserted that the government stands by its estimates, and the significantly larger figures cited by others are derived from farm valuations that do not “tell you what the inheritance tax liability would be.” Murray stated that the government “could not justify leaving the situation unchanged” given the “urgent need to repair the public finances.” He further contended that Labour is dedicated to assisting UK farmers, highlighting a £5 billion investment in farming and land management in England over the coming two years, as announced in the Budget, “which will help restore stability and confidence in the sector.” The Conservatives, who advocate for the government to abandon the policy, arranged the debate. The Conservative motion was rejected, yet Markus Campbell-Savours, the Labour MP for Penrith and Solway, leveraged the discussion to urge his party to reconsider its stance. He recalled that during the election, he had encountered “what I thought were assurances” indicating no intentions to alter the inheritance tax exemption for agricultural property. He then stated, “On this basis, I reassured farmers in my constituency that we would not. Now, I’m simply not prepared to break my word.” Victoria Atkins, the Conservative Shadow environment secretary, explained that her party had introduced its motion to allow Labour MPs representing rural constituencies “time to reflect and consider whether they can continue to support this vindictive tax.” Following protests against the changes outside Parliament last month by thousands of individuals, including TV presenter Jeremy Clarkson, Atkins implored Labour to “show humility and compassion” and investigate the widespread opposition to the policy. In his address, Murray had asserted that the changes “will make land prices more affordable for farmers” because fewer individuals will purchase land solely to circumvent inheritance tax. However, Conservative MP Sir Geoffrey Clifton-Brown informed the Commons that “foreign investors and hedge fund managers” would probably acquire the land, thereby benefiting most from the new inheritance tax regulations. The MP for North Cotswold commented, “They will not have generations of knowledge to work this land and will likely take prime arable land out of production, as they could possibly make more money from alternatives.” During the discussion, Labour MP Maya Ellis proposed that including more farmers in inheritance tax payments would ultimately boost their profits, citing potential benefits such as lower energy prices and an improved health service financed by the additional tax revenue. The MP for Ribble Valley stated, “we need to make our tax structures work better.” Copyright 2024 BBC. All rights reserved. The BBC is not responsible for the content of external sites. Read about our approach to external linking.