I happened to be in that London on Tuesday, mostly around Victoria station and the west end. There seemed to be a lot of well spoken, and loud, people wearing wellies for some reason. I wondered about this as the old rule for the well-heeled was “no brown in town”. Then I realised that they were breaking their own etiquette rule for a protest against the planned change to taxing land values in the event of inheritance. These were rich land owners who did not want to be taxed … but loudly claiming the tax was an assault on British farming.
But is it?
It turns out that the average farm size is 82 hectares (about 200 acres). At £9k per acre this is £1.8 million - so the average farm is below the £2m taxable threshold (this is the £1m taxable level on farm land, plus the inheritance levels for everyone). You would need to be a farm of more than 225 acres (of good agricultural land, so probably more acres in total) to get any tax in the event of inheritance. For England this is only 25% of the farms.
Even then, the limit goes up to £3m if its the spouse who is inheriting the farm. And for both the tax if 20% (half normal inheritance tax) that can be paid over ten years. So if you are the son/daughter of a wealthy farmer with a big 350 acre farm then you’ll pay £27k a year to inherit a £3.5m farm. And there are only a handful of such farms each year.
Worse, many wealthy people who wish to avoid inheritance tax have been buying land and up until this budget this was a favoured way to duck the tax. 40% of farms were bought as such investments. These people are not farmers.
Plus, the ability to keep land in one family without any tax burden, and the buying of land by the rich, has meant that (1) the price of land has artificially gone up, (2) little land is being sold off to pay such taxes. This has excluded people from getting into farming and hoarded the wealth to few very rich land owners.
I would have shared my thoughts on wearing brown in town if I’d done some reading on the matter before I was in that London.
Thanks for taking the time to explain the situation Lincs, much appreciated. I would like to hear an opinion from a farmer though, just to hear his or her side of the story. I think wealth is relative, to somebody with more than £100,000 in the bank I would class them as wealthy, but a homeless person would probably class me as wealthy.
There does seem to be a vendetta against farmers just lately, not just in this country either, which makes me think that the agenda is bigger than any government. The trouble is, when you have such a large national debt you are obligated to the lender.
The people protesting against this change to inheritance laws are not typical farmers. I’ve a lot of sympathy for the pressures and poor earnings for the majority of ordinary farmers. Many are tenant farmers, many who own their land have relatively small farms (less than 100 acres). None of these will be affected by this new inheritance rules. All of them deserve more government support and (particularly) better prices for their products - supermarkets really squeeze the farmers. These welly wearing protestors are more likely to be in a Range Rover supervising workers than driving the tractor or herding cattle. But they are claiming they represent all of farming - but this is simply not true. And its even worse when you look at how much of farm land is simply being sold for investment… forestry, solar farms. Why should these money makers be exempt from inheritance taxes?
Farmers here, ourselves included do not have the cash in the bank to pay this tax. All the farms wealth is tied up in assets, tractors, and all the attachments ect, also combines all costing thousands and thousands of pounds. We have to pay these things up as none of us have the cash in hand that would be needed. But all of the machines are needed to work the farm.
Dunc’s place is not massive and it’s a 4th generation farm.
I think I heard there is an opportunity to spread the cost of the tax over ten years.
That sounds like it won’t be big or valuable to hit the near £2m level at which the tax will come in. Unless your not massive farm is unusually valuable.
But you do raise a good point about farm equipment. I do not know if these are included in the estate value, and how they are valued. But surely second hand, well used machinery is not massively valuable? (Don’t tell me that you’ve a lot of new kit, which most farms cannot afford. Not unless they’ve Clarkson’s bank account.)
This is exactly what I have seen in regard to every other farmer I have known across the U.S. I wonder what the income/fixed asset value of farms in GB. Do politicians and those who are proponents of this tax understand how non-liquid farms are?
The non-liquid assets needed to run a farm run easily into the millions, even on a small side. What happens if a couple is not married? What if the farm is run by a single person and adult children? I can see this tax as potentially destroying many genuine family-run farms and punishing most the people who have the skill and knowledge to pass on after a farmer’s death - the farmer’s family.
The farmers in the plains states have their “wealth” in fixed assets, but their take home pay is surprisingly low compared to their worth. “Pay” always goes back into fertilizer, payroll, pesticides, purchasing livestock, maintenance (fences, buildings, equipment) and vet bills. A $2£m farm family in the US is living a middle class lifestyle, but discretionary money is almost always discretionary - to the farm. I have yet to see a $2M farm family dripping in jewelry and taking lavish vacations.
That’s the land. A working farm with a house, a single outbuilding and used farming equipment would easily go into a valuation o $2-3£m.
See Cinderella’s post the thread I started a few days ago on this subject identifies farm equipment on the business side.
There is something worth investigating in regard to purchasing extra land as a dodge, but aren’t those taxes paid at that time of purchase and annual property taxes (at farm rates)? I’m interested in those UK polices. If you want to tax some wealthy landowners and loosen up rich, private ownership, you might start with the 1% of land owned by the monarchy.
I am unclear as to when inheritance taxes are supposed to be paid. Aren’t they after the death of a person? How much time afterward do the heirs have to pay that tax?
California, has a smaller percentage of family-owned farms because of high taxes. The larger farms worth $1M or more produce 60% of the value of all agricultural products. As expected, industrial farms (think no farmhouses, no trees, no conservation lands) produce the most per acre, but that money goes abroad or to stock shareholders. Do you all have restrictions on farmland sales to prevent corporate and foreign ownership? Have the consequences of an inheritance tax really been considered (think foreign ownership, corporate industrial farming, development)?
That was an interesting comment about the Land Rover. If there was ever a place that a Land Rover would be needed, it would be a farm.
I may be off on some of these observations since I am looking at this through the lens of U.S. farming, but I would be very wary of this proposal. IMHO inheritance taxes should never touch the bottom 99% of taxpayers.
Protect your farmers. Protect your farms. Protect what you have earned.
UK farms, indeed across Europe, farms are typically quite small. It is more common to hire a combine harvester rather than own one. So I doubt many farms have a total value of more than £2m. And the problem of wealthy landowners retaining large properties is that these are not freed up on the death of the owner to incoming, budding farmers. They are kept by the family with no inheritance tax.
You do make a very valid point about non-liquid assets. I’d guess that the 10 years to pay any inheritance tax reflects that issue. If assets need to be sold, say a couple of fields, to pay such a tax then this is quite a long time to move non-liquid to cash.
And for info, the inheritance tax relief on agricultural land was only introduced in 1984. Before this the farming world continued with inheritance tax being paid on farms. After 1984 it became increasingly common for the wealthy to opt for land purchase to reduce their inheritance tax bill. So a tax dodge.
You raise a good point about taxing wealth anyway. Spain has been demanding a world-wide wealth tax for some time - it has to be global as otherwise the wealthy would simply opt for the cheapest tax country. Super wealthy don’t pay enough tax. Certainly nowhere near the income tax levels ordinary people have to pay. But each country should be closing loopholes that only the very rich can access. Is that not fair?
All interesting information, L. I was not aware of Spain’s proposal. Will read up.
So Lincs, are you saying that you are right and all these are wrong?
The Farmers in London on Tuesday…
What about the “Easy Payments”?
Is that what wealthy land barons look like in 2024? 
Apparently, I let Downton Abbey go to my head 
.
What happens if the farm is in a company name or trust?
My cousin owns several thousand acres in Suffolk but it is in the name of a limited company and has been for years, in fact set up by his father who died in the 1970s (from memory)
That is an excellent question!
The number of farms that would be affected by the change to inheritance is a lot lower than the protestors. So either there are lots of protestors joining in solidarity and support (which is of course ok) or there is a little bit of exaggeration going on here.
There was an example of such exaggeration on a LBC phone in. Search facebook for James O’Brien angry farmer. This farmer said his family farm was worth £4.5m but his income was £25,000. His principle point was that an inheritance tax on this would be hundreds of thousands (in fact probably £500k to be paid over 10 years, assuming parent dying, estate value is accurate, etc.). Seems like a valid worry. (Solved by selling off 50 acres of course.)
But, if the farm income (as opposed to his own income) is 25k then this is about 1/2 percent return on investment. That seems wrong and would reflect a failing business. And its failing because the valuation is very high, and its high because the price per acre has been pushed up by investors - not farmers. If 40% of farm land is being bought by tax-dodgers then that’s pushing up land prices artificially. No-one would buy into a business offering 0.5% return. Farmers would greatly benefit from land prices re-adjusting to reflect the value they can create.
So why are they protesting? Most likely because the £25k claim is not a true reflection of the revenue the £4.5m generates. Its more likely that this is the declared income of this one farmer - because that is what he wants to be taxed on. The farm is a business. Run as a business. And the farm is not generating a measly £25k a year.
Now, I repeat, farmers are mostly dealt the bad hand. The government does not adequately support them and their customers (ending up with the supermarkets) consistently show bullying pressure on the prices they get. These are real grievances. But dodging tax is not.