Reeves still has time for reset on farming IHT, says NFU

The NFU has urged chancellor Rachel Reeves to consider alternatives to the family farm tax to unlock investment in British food production and renew its relationship with the industry.

The 2024 Autumn Budget sent shockwaves through the industry as plans were announced to cap agricultural property relief from inheritance tax at £1m.

As a result, the industry has been holding back investment to save capital in anticipation of potential tax liabilities.

See also: Editor’s View: Growing hope on IHT but still no certainty

NFU president Tom Bradshaw has written to the chancellor expressing concern that farmers and growers are now either opting not to invest in their businesses or are unable to.

However, he emphasised that it was still possible to make changes.

“During the Labour Party conference, the Defra secretary [Emma Reynolds] said she wanted to ‘make sure the government renews our relationship with the NFU and the farming community’,” he said.

“Even at this late stage, there is still time for the government to do that.”

Changes in the upcoming budget, the NFU said, should include a better-targeted approach to IHT reform that raises more revenue for the Exchequer and rules out any changes to IHT relief for lifetime gifts.

It also called on the chancellor to increase the annual investment allowance to £5m and extend it to include assets qualifying for structures and buildings allowance, to support investments in efficiency and productivity improvements.

Hopes raised

According to industry leaders such as the Tenant Farmers Association, the NFU and Farmers to Action, there is optimism about a potential change to the IHT plans.

Farmers Weekly understands that officials are looking at the “minimum share rule” proposed by the Centre for the Analysis of Taxation.

This would provide full relief from IHT up to £5m per person (£10m for a married couple), where farmland or business assets constitute at least 60% of an estate.

Game changer

GSC Grays, an independent firm of farm business consultants and land and estate agents, said a rethink could bring much needed relief to the industry.

“If the suggestions are correct, then it is a game changer and a positive result for the farming sector,” said Robert Sullivan, director at GSC Grays.

He added that this would mean family farms could structure the transition of assets according to their wishes, rather than avoid a significant IHT payment that would reduce the likelihood of the business continuing.