CLA warns of budget 'betrayal' over inheritance tax reliefs

Chancellor Rachel Reeves is preparing to present her first budget to parliament on October 30.

And speculation has been mounting that the Labour government is looking at potentially scrapping or capping agricultural property relief (APR) and business property relief (BPR) - despite pre-election assurances they would not be changed.

Currently, APR allows working farms to be passed to the next generation after the death of the principal farmer - helping ensure the continuance of food production businesses - while BPR fulfils the same objective for other types of family firms.

The Country Land and Business Association (CLA) says any reduction to these reliefs could put family farms, operating on small margins, in the firing line.

Without them, it says an average family farm of 215 acres would need to sell 40pc of its land to fund inheritance tax liabilities.

Cath Crowther is East regional director for the Country Land and Business Association (CLA East) (Image: Newsquest) CLA East regional director Cath Crowther said: “If the government rips the rug from under hard-working farmers by removing these reliefs, it would be a catastrophic betrayal.

“Someone inheriting a family farm from their parents might be forced to sell up to 40pc of it to pay the inheritance tax bill. If 5pc of farms have to sell at their next point of inheritance, 27,000 holdings face going out of business.

“In many cases it would be the end of the family farm and a hollowing out of rural communities, stifling rural entrepreneurialism.

“For generations, people who own land have considered themselves temporary custodians, to pass it on to those who will follow. It inspires long-term thinking like tree planting and stewardship and a quiet acceptance that those who make the decisions will never see the fruits of their labours. If these reliefs are scrapped, it will upend it all."

CLA East is urging the region's farmers to write to their MPs, asking them to "help protect food security and support the rural economy by maintaining these reliefs".

Meanwhile, the National Farmers' Union (NFU) has written a letter on behalf of its 45,000 members to prime minister Sir Keir Starmer, calling on him to deliver a larger agriculture budget and confirm the continuation of APR on October 30.

Tom Bradshaw, president of the National Farmers' Union (Image: NFU) NFU president Tom Bradshaw said reports that the government is considering cutting the agriculture budget and possibly reviewing APR are "incredibly concerning".

"The loss of APR could mean family farms, who are vital to producing food for the country, providing jobs and looking after our countryside, having to be sold to cover the costs," he said.

"Changes would amount to a 'Family Farm Tax'. It would also have a devastating impact on tenant farmers and new entrants. 

“At a time when farmer and grower confidence is at its lowest on record due to high production costs, extreme weather and uncertainty during the agricultural transition, we need stability and that genuine partnership with government which the prime minister spoke of [at the NFU’s conference in 2023, while in opposition]."

Mr Bradshaw is also calling for an increased annual agriculture budget of £4bn for England - equating to £5.6bn UK-wide - which he describes as "an essential investment to deliver the government’s environmental goals, increase growth and support the economic stability of farm businesses".

The current £2.4bn annual agriculture budget for England is being shifted away from EU-era subsidies to a new system of nature-friendly farming incentives.

Chancellor Rachel Reeves will present her first budget to parliament on October 30 (Image: Sonya Duncan) Conservative MPs have also urged the chancellor not to cut the farming budget on October 30, saying it would harm food security and threaten farmers’ livelihoods.

The government had reportedly been considering cutting the budget by £100m - a figure said to represent an annual underspend on the new environmental land management (ELM) schemes during the last three years, with civil servants struggling to justify the extra money to the Treasury.

But senior Conservative MPs insisted in a letter to the chancellor that such an explanation “will not wash”.

They said the previous government had “intentionally left room in the budget to make sure that it could accommodate the maximum possible uptake of the ELM schemes”.

The MPs added: “The whole budget should be spent for its clear purpose: to support farmers, food security, and nature recovery. At a time of significant financial and environmental pressures, cutting this budget would be a short-sighted act of self-harm.”

A government source said: “The chancellor has been clear that difficult decisions lie ahead to repair the colossal damage left by the Conservatives and address the £22bn hole in the public finances.

“Decisions on how to do that will be taken at the budget in the round.”