(Bloomberg) -- Chancellor of the Exchequer Rachel Reeves defended her move to levy inheritance tax on UK landowners who pass down agricultural property to their children, after critics said the move would hurt the sector and lead to the breakup of family farms.
Agricultural estates were previously exempt from inheritance tax in Britain, but under plans in Reeves’ budget on Wednesday, farmers will have to pay a 20% levy on bequeathed assets over £1 million ($1.3 million). In a round of media interviews on Thursday, Reeves said the change would continue to protect smaller farms, and that three-quarters of cases would be unaffected.
“You can have some of the wealthiest landowners, not farmers, in this country who pay no inheritance tax whatsoever, while middle class families do,” Reeves said in an LBC interview. “That is not right, and that’s why we’ve closed that loophole.” The chancellor told BBC TV that “there are a lot of landowners who are very wealthy, some who buy land to avoid paying inheritance tax.”
The inheritance tax change has sparked a barrage of criticism from rural Britain, with the National Farmers’ Union warning that some families will now have to sell their farms to be able to pay the new inheritance tax bill. The Treasury expects the policy change will raise about £500 million a year by 2030.
“Just because a farm is a valuable asset, it doesn’t mean those who work it are wealthy,” NFU President Tom Bradshaw said in a statement. “This is one of a number of measures in the budget which make it harder for farmers to stay in business and significantly increase the cost of producing food.”
Critics of Reeves’ tax change also included TV presenter and celebrity farmer Jeremy Clarkson, who has starred in the popular Amazon Prime documentary Clarkson’s Farm. Clarkson said on a post on X that farmers had been “shafted.”
“Our commitment to farmers is steadfast, that’s why we’ve protected the farming budget for the next two years,” Prime Minister Keir Starmer’s spokesman, Dave Pares, told reporters on Thursday.
The change to the inheritance levy was just one part of an overall £40 billion of tax increases that Reeves announced in her budget, as she also delivered a £70 billion annual increase in public spending and moved to cover a fiscal shortfall left by the previous Conservative administration.
--With assistance from Ellen Milligan.
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