Governments First Budget

OK for those exercised over the IHT on Agricultural land

An explainer from Dan Neidle - tax consultant

Background: if I'm a landlord with a portfolio of properties, or an investor with a portfolio of listed shares, when I die my estate pays 40% inheritance tax (IHT). Until now, APR meant that agricultural estates were completely exempt from IHT.

The Budget caps the exemption at £1m. Beyond that, IHT applies to agricultural property at half the usual rate - so 20%.

But the £1m figure is misleading, because IHT won't usually apply to farms worth £1m...
... Small farms usually include the farmhouse. So, for a married couple, the estate as a whole will benefit from £650k total nil rate band plus £350 residence nil rate band plus £1m agricultural property relief.

That's £2m exemption in total, covering most small farms.

That's why, if we look at the stats, 87% of inherited agricultural property used less than £1m of APR and so will remain completely exempt.

Almost half the £1bn cost of APR went to 63 estates of median value £8m. Doesn't seem great value for money for the taxpayer.

For farms just over the threshold, the IHT is easily managed.

Farmers who are youngish (say <70) can buy life insurance to cover the IHT. Won't cost much given the small level of cover required (i.e. for a £2m farm it's £200k IHT max).

As they get older, and life insurance starts getting expensive, they can give the farm to their kids. Live seven more years; no IHT. No need for the insurance anymore.

(The dirty truth about IHT planning is that anyone youngish, in good health, who's worried about IHT should just buy lift insurance. By far the easiest/cheapest/most ethical way to avoid the impact of IHT, without avoiding IHT
Once we get into much larger agricultural businesses, worth many £m, then insurance becomes expensive, but at that point we're looking at sophisticated businesses and it's reasonable to expect people to finance the tax (which can be paid over 10 years).

I'm seen some hysterical takes on this: "£20k could make the difference between a £2m farm being profitable or loss making". [£20k over ten years = IHT on £2m]

Nope. If it's making less than £20k profit/year, it ain't worth £
And we've been here before. The old capital transfer tax (predecessor to IHT) had no agricultural exemption at all. In 1975 a 30% relief was introduced. The complete exemption we have now was only created in 1992.

The sky did not fall in.

Answer to my own question.
www.fwi.co.uk/business/markets-and-trends/land-markets/who-owns-britains-farmland

I’m not sure the average UK acreage and prices mean much. Acrage is much greater in England and Scotland than in Wales, here it is 119 acres. Land is cheaper too, the average price for arable land is £8,500/acre, with £6,000/acre for pasture and £1,000/acre for hill ground according to the latest quarterly figures. Are many of the large farms in England owned by conglomerates?

Wyllow3

Same happened in 2021, when BJ made connections with big possible green investors

Telegraph

"Inside Boris Johnson’s bid to woo the world’s green investors
Prime Minister pitches the likes of Bill Gates and Larry Fink on Global Britain's net zero ambitions"

www.telegraph.co.uk/business/2021/10/19/inside-boris-johnsons-bid-woo-worlds-green-investors/

It's now being touted as some evil plot by SM.

I wasn’t in favour of the plan then.

Difference being Labour have opened the barn doors wide and wedged them firmly open.

Jane43

GrannyGravy13

Wyllow3

So agree on the private jets!

I am not against per se, and will suck up the extra tax on flight upgrades.

If the farming IHT brings about the demise of small farms in the U.K., no doubt all the grain etc., which will be shipped in more frequently on polluting container ships will be subject to the same pollution tax

I am really struggling to see anything good regarding IHT on farms. It totally goes against the policy of less food miles, eat local produce etc., as there will not be local produce available to purchase.

It doesn’t apply to small farms does it? That’s what Rachel Reeves said on BBC Breakfast this morning: 70% of farms won’t be affected.

It applies to all farms valued at over £1,000,000

Average price per acre of agricultural land in 2023 was £11,300
any farm over 80 acres would be subject to IHT at those values.

Average U.K. farm acreage is 213…

that was for GG13

Same happened in 2021, when BJ made connections with big possible green investors

Telegraph

"Inside Boris Johnson’s bid to woo the world’s green investors
Prime Minister pitches the likes of Bill Gates and Larry Fink on Global Britain's net zero ambitions"

www.telegraph.co.uk/business/2021/10/19/inside-boris-johnsons-bid-woo-worlds-green-investors/

It's now being touted as some evil plot by SM.

GrannyGravy13

Wyllow3

So agree on the private jets!

I am not against per se, and will suck up the extra tax on flight upgrades.

If the farming IHT brings about the demise of small farms in the U.K., no doubt all the grain etc., which will be shipped in more frequently on polluting container ships will be subject to the same pollution tax

I am really struggling to see anything good regarding IHT on farms. It totally goes against the policy of less food miles, eat local produce etc., as there will not be local produce available to purchase.

It doesn’t apply to small farms does it? That’s what Rachel Reeves said on BBC Breakfast this morning: 70% of farms won’t be affected.

Allira

^Why we all need to buy anyway I just don't understand. If you have rented a house you are happy in, what you really need is security of tenure, swift repairs and a rent that feels "fair"^

I think that older people may feel more secure in a property they own rather than the insecurities of renting. My MIL rented privately all her life but, being widowed at an early age, she spent her life being worried about being 'thrown out' especially when her sons had grown up and left. The rent became another worry after she retired too.

If you have a rented house that you are happy in, that gets repaired, and you continue to be able to afford the rent, then renting is fine.
From experience
When budgets get tight, some councils are very slow to provide even small repairs and unwilling to refund the cost if you get them done yourself. Always, or since at least 1998, councils blame their inability to do repairs and their need to raise rents, on whichever government is in power.

There are also the comments of you don’t need a house that big now there’s only the two, or the one of you. It feels like a threat.

There were a couple of offers to rehouse, but all away from family, friends, and familiar places, quite frightening when you are old.

I wish we could have afforded to buy for them when the option was there.

Bill Gates and Larry Fink visit Starmer and Reeves days ago.

Gates and Finks are massive buyers of agricultural land…

Grantanow

I think business is protesting about the increased employers' NI but keeping stum that small businesses with 4 or less are exempt from the increase and SMEs have some extra business rates relief.

The level it is starting to be paid at is also reducing from £9,100 to £5,000.

As far as our SME is concerned it will mean a shelving of further investment, no new employees unless absolutely necessary and serious consideration to the further training (only if the benefits are considerably more than cost)

I think business is protesting about the increased employers' NI but keeping stum that small businesses with 4 or less are exempt from the increase and SMEs have some extra business rates relief.

grandstanding gobshites

Love it!

Wyllow3

So agree on the private jets!

I am not against per se, and will suck up the extra tax on flight upgrades.

If the farming IHT brings about the demise of small farms in the U.K., no doubt all the grain etc., which will be shipped in more frequently on polluting container ships will be subject to the same pollution tax

I am really struggling to see anything good regarding IHT on farms. It totally goes against the policy of less food miles, eat local produce etc., as there will not be local produce available to purchase.

So agree on the private jets!

Is an endorsement by the IMF worth anything? given their predictions have been known on many an occasion to be wrong.

The Office for Budget Responsibility has pointed out the glaringly obvious fact that the hike in employers' NI will possibly affect salary rises. It is also likely to impact on the hiring of staff resulting in increased unemployment, a lower tax take for government coffers and by association unemployment benefits rising. I suppose all that remains to be seen as to how that will pan out over the course of the next five years. I don't think anyone wants to see fewer opportunities in the job market, particularly for those starting out.

I just wish there could be more tax levied on banks' overwhelming profits, they're nobody's friend really, neither the individual or small businesses. The big behemoths Amazon meanwhile will still continue to pay a fraction of what they should pay but there is no multi lateral consensus to change any of that.

I'm in agreement with GG over the plight of farmers, could they be any more beleaguered, people we really need.

However, on a more positive note some good things, the freeze on fuel duty, rises would have been so inflationary and I really liked her tax hike on private jet flights, just how nauseating is it listening to some of those grandstanding gobshites individuals who fly in on them to Davos year on year to lecture the plebs on the error of their ways, and c'lebs who drone on about their green credentials, although such people are so rich it will probably hardly affect them at all.

I'm hoping this government's prospective house building will get going and make a real difference to affordable housing.

Also the commitment made to recompense those who have suffered so much from the infected blood scandal and the Post Office, so long overdue.

Not exactly new news, here are calls from 2021
www.bbc.co.uk/news/science-environment-57580254

It's a very long standing debate, and there is a no policy in the pipeline despite rumours from some newspapers a few days ago along the lines of "Tories warn that.....".

Britons urged to eat less meat and dairy products:

And just one more gripe - can someone stop EM from capturing carbon and burying it in pipes under the sea bed?
Life is feeling very dystopian just now.

I notice Corbyn’s mentor - Richard Murphy - is unhappy with the budget. That should give us heart😊.

GrannyGravy13

ronib

Gg13. Ed Milliband wants fewer working farms to cut down on methane emissions. This planet has had cows living on it for many years.

I think EM should learn that the best way to carbon capture is for the countryside to be healthy, full of trees and crops.

Putting solar panels on agricultural land is short sighted at best foolish at worst.

The U.K. needs to improve its food production not put it in decline and to be more reliant on imports from around the world which add to pollution due to transportation.

Ed Milliband should concentrate on cutting the amount of plastic polluting our planet.

GrannyGravy13

I haven’t seen one comment from any Farmers union/organisation of farmer/farming family which is positive.

Comments like this from Labour do not help

Good grief!! Stupid man. Just the person you need as Minister of State for Environment, Food and Rural Affairs.

Well, junior doctors went on strike, train drivers went on strike, the country coped with difficulty, no-one would notice if politicians went on strike but if farmers went on strike what would be the consequences?

Steve Reed probably thinks that food arrives like magic plastic wrapped on supermarket shelves.

GG13 yes but how to tell EM so that he gets the message? He feels like a runaway train.

ronib

*Gg13*. Ed Milliband wants fewer working farms to cut down on methane emissions. This planet has had cows living on it for many years.

I think EM should learn that the best way to carbon capture is for the countryside to be healthy, full of trees and crops.

Putting solar panels on agricultural land is short sighted at best foolish at worst.

The U.K. needs to improve its food production not put it in decline and to be more reliant on imports from around the world which add to pollution due to transportation.

Agriculture is devolved, so this applies to England. Not that it’s all rosy elsewhere, but we are in control of our own policy and government spending. That is actually true of a lot of areas covered in the budget.