Rachel Reeves’s plan to reduce inheritance tax relief for farmers risks hampering growth and destabilising the wider economy, according to Rain Newton-Smith, head of the Confederation of British Industry (CBI).
Addressing the National Farmers’ Union (NFU) on Tuesday, Newton-Smith criticised the Chancellor’s decision to cut Agricultural Property Relief—previously exempting farms from inheritance tax—as a “£500 million raid” that has led to a collapse in industry confidence.
Under the revised policy, scheduled for April, the effective inheritance tax (IHT) charge on farm estates will climb to 20 per cent. The CBI boss argues this puts the “foundational sector” of farming in jeopardy and could threaten Britain’s domestic food security: “Fifty-eight per cent of food consumed in the UK comes from UK farmers,” she noted. “To ensure a resilient economy, we need a strong farming community.”
While Reeves contends the measure is essential to boosting tax revenues, critics point to the disproportionate impact on family-run businesses. Newton-Smith warns thousands of farmers face being forced to sell land or assets to cover these new costs. CBI research estimates that comparable reductions in relief could cost up to 125,900 jobs by 2030 and may ultimately result in a £1.26 billion net loss to the Treasury.
Tom Bradshaw, the NFU president, says he has offered an alternative: levying IHT only if farm assets are sold within seven years of the owner’s death. He contends this approach would protect farmers from incurring punitive taxes on illiquid assets. However, Bradshaw told delegates the Treasury had effectively dismissed the proposal, leaving farmers disillusioned and determined to “fight the family farm tax until ministers do the right thing.”
Environment Secretary Steve Reed is expected to face questions from NFU members at the conference. While he has pledged to make agriculture more profitable, political pressure continues to grow on Reeves ahead of the next Office for Budget Responsibility update. The Chancellor’s new fiscal rules mandate day-to-day spending be covered by tax receipts, leaving little budgetary headroom if this IHT reform proves detrimental to revenues in the longer term.
In the meantime, Newton-Smith insists an urgent dialogue is needed before thousands of farming families are left facing financial strain. “Any plan for growth or industrial strategy will fail if we do not first back our foundational sectors,” she said.
Jamie Young
Jamie is Senior Reporter at Business Matters, bringing over a decade of experience in UK SME business reporting.
Jamie holds a degree in Business Administration and regularly participates in industry conferences and workshops.
When not reporting on the latest business developments, Jamie is passionate about mentoring up-and-coming journalists and entrepreneurs to inspire the next generation of business leaders.