A bid by the division for rural affairs to melt modifications to inheritance tax for farms – probably by exempting some older farmers – has been rejected by the Treasury.
The Treasury stated there could be no change or mitigations to the coverage, which can see an finish to inheritance tax exemption for some farms.
From April 2026, farms value greater than £1m will face an efficient inheritance tax fee of 20% – half the standard fee of 40%.
BBC Newsnight understands that the Division for Setting, Meals and Rural Affairs (Defra), which represents the pursuits of farmers in authorities, believes it was not correctly consulted over the change.
The division was knowledgeable in regards to the coverage the night time earlier than it was introduced within the Finances.
The transfer has been branded “disastrous” by the National Farmers’ Union (NFU), with some farmers warning it might decimate the countryside.
Defra instructed softening the coverage to exempt some older folks, probably these over the age of 80.
The April 2026 begin for the coverage means they might not have time to utilize current guidelines to skip inheritance tax by passing on an asset seven years earlier than loss of life.
However this suggestion has been dismissed by the Treasury, which stated it had taken “a good and balanced strategy”.
Since its introduction in 1984, agricultural property reduction (APR) has allowed small household farms – together with land used for crops or rearing animals, in addition to farm buildings, cottages and homes – to be exempt from inheritance tax.
The Treasury stated 40% of APR had been going to “the 7% wealthiest claimants”, and that it had “made a troublesome determination to make sure the reduction is fiscally sustainable”.
It put this in opposition to a backdrop of “public providers crumbling [and] a £22bn fiscal gap inherited from the earlier authorities”.
“Around 500 claims each year will be impacted and farm-owning {couples} can cross on as much as £3m with out paying any inheritance tax – this can be a truthful and balanced strategy,” a spokesperson added.
There are divisions in authorities over the change.
Some ministers imagine it’ll solely have an effect on comparatively rich farmers – a pair utilizing all their inheritance tax advantages will have the ability to cross on a £3m farm tax free. Any inheritance tax cost on farms will be paid over 10 years.
However different ministers imagine the chancellor is at risk of undermining Labour’s relations with rural Britain whereas elevating a relatively small amount of money.
The change might elevate round £560m.
Some sources in authorities have expressed issues that the chancellor is creating pointless grief over a change that isn’t, in relative phrases, an enormous cash spinner.
There are issues that the change – which has proved controversial amongst farmers since its announcement – might turn out to be “totemic” in rural Britain.
The NFU warned it might “snatch away the following era’s skill to hold on producing British meals” and see farmers compelled to promote land to pay the tax.
A rally to protest in opposition to the plan might be held in Whitehall subsequent Tuesday.
There may be additionally a dispute across the figures used to calculate the modifications.
Farmers leaders have been instructed by Defra that the figures come from the Treasury and never their division.
Tom Bradshaw, the president of the NFU, stated that Defra figures confirmed the modifications would have an effect on 66% of estates.
The Treasury stated the determine was 28%.
Clive Bailey, founding father of the Farming Discussion board which can be organising a protest in central London subsequent week, stated on Thursday that any change to the brand new guidelines “could be a step ahead”.
Mr Bailey, who farms in Staffordshire, stated the instructed exemption ought to cowl folks a lot youthful than 80.
In contrast with the broader inhabitants, farming sees “lots of people who ought to have retired already nonetheless working”, he instructed BBC Radio 4’s In the present day programme.
He known as the inheritance guidelines “so poorly thought out”.
The price of operating a viable farm exceeded £1m, he stated, arguing that the federal government wanted to sit down down “with actual household farmers or agricultural economists”.
“We’re not particular, however the financial circumstances of farming are very totally different to different industries.”
A Defra spokesperson stated: “With public providers crumbling and a £22bn fiscal gap inherited from the earlier authorities, we have now made the troublesome determination to reform Agricultural Property Aid in a balanced and truthful manner.
“All ministers assist the coverage and it’ll not change.”
