Inheritance tax will hit rural families and nature targets

The Wendling Beck Environment Project is a habitat creation, nature restoration and regenerative farming initiative, spanning almost 2,000 acres near Dereham.

In a transition away from traditional farming, it aims to monetise "natural capital" by selling credits to developers under new Biodiversity Net Gain (BNG) rules.

But it remains vulnerable to the changes announced in last month's budget, when chancellor Rachel Reeves infuriated farmers by announcing that agricultural property relief (APR) would be cut on farms value at more than £1m - leaving family businesses facing a crippling 20pc tax bill when handing land down to future generations.

The Wendling Beck project incorporates four family farms, of roughly about 500 acres each.

Glenn Anderson, strategy lead for the Wendling Beck Environment Project (Image: Lucy Carrigan) One of them is strategy lead Glenn Anderson, who has already removed most of his land from arable production and is transitioning to habitat creation while legal agreements are drawn up to enable him to sell environmental credits - some of which are a 90-year commitment.

His children, Phoebe, 19, and Isaac, 17, are both currently studying subjects which could help with the project’s future management.

But he estimates they could be hit with an inheritance tax bill of around £1m when he dies.

"That is absolutely not doable," he said. "It’s £100,000 a year for ten years, and the cash is just not there.

"We understand that we need to pay more tax. We’ve got no issue with that. But this is targeted at big rich landowners and it has missed them and hit the people in the middle. Most farmers are cash poor, asset rich because the farms have been passed down the generations to stop them being fragmented.

"Within farming you are always thinking about the next generation. It is a legacy transition in terms of both knowledge and assets. I am a fifth generation farmer, so our assets have been passed down the generations.

"With the policies the way they are, the vast majority of farms will be affected, and will have to sell a proportion the land to pay death duties, so you will end up with a really fragmented farm system and that land will be snapped up by institutional investors who are looking at this new natural capital land acquisition model, and don’t have death duties to pay.

"So you are facilitating a passing of assets from small family farms into the hands of corporate investors. That is the reality of what this policy will do."

Mr Anderson said one positive from the budget was that APR was extended to land under environmental management, aligning nature recovery projects with farming businesses.

"That system is now aligned so you won't get unfairly penalised by going into a long-term environmental project," he said. "But they gave with one hand and took away with the other.

"So why would people invest in these environmental schemes and the betterment of the land when you are curtailed from that generational pass-down? It is just counter-intuitive."

Tom Cross, one of the Wendling Beck landowners, and his family (Image: Daniel Casson) Mr Anderson also disputed the suggestion that landowners should gift their property to the next generation earlier, which would be free of inheritance tax if done at least seven years before they die.

Speaking on behalf of the four family farms involved in the project, he said: "To say people should be getting their succession planning in place and passing their assets down early, using the seven-year rule, is frankly just nonsense - because you don’t know when you are going to die, and you don’t want to pass these assets down to children who are not in a life position to deal with that.

"You could ruin that child’s life by passing it down too early, they could get divorced and lose 50pc of the farm because they are not at a stage of life where they are settled.

"You should be able to pass those assets down at the right time in people’s lives.

"My kids are 17 and 19, so when do you want me to give those assets to my kids? If you pass that down there are quite strict rules about not being able to take an income from those assets, so what am I supposed to do in my retirement?"

Cath Crowther, East regional director for the Country Land and Business Association (CLA),  said the proposed changes to inheritance tax relief "will mean the UK government's own ambitions and targets for nature will be impossible to deliver". 

"Farmers and land managers in our region are leading the way when it comes to producing high quality food and protecting and enhancing the environment. But they have been betrayed by a government that needs to wake up and realise the devastating impact of its decisions," she added.