89,500 farmers to be hit by inheritance tax, says CAAV
© Tim Scrivener About 20% more farmers than previously thought will be hit by inheritance tax (IHT) as a result of inflation, according to the Central Association of Agricultural Valuers (CAAV).
It says the government has not factored in the impact of inflation on frozen tax relief thresholds, and many more farm business will be affected as a result.
This analysis follows earlier modelling by the CAAV which suggested that five times more farmers than the government previously predicted were likely to be hit by IHT.
See also: Farmers to vent frustrations at Oxford Farming Conference
The nil rate tax band of £325,000, which is available to all taxpayers, has been frozen since 2009 and is set to remain frozen until 2030.
Jeremy Moody, secretary and adviser to the CAAV, said: “That gives no confidence that the £1m full relief for agricultural property relief (APR) and business property relief (BPR) will be protected against inflation.
“Even more farmers would therefore be caught than has been suggested.
“The first 10 years alone would add some 14,500 (19%) to the CAAV’s assessment of 75,000 affected farming taxpayers over a generation – simply because of inflation, if there is no policy change. More would follow as each year goes by.”
Calculations by the CAAV show that when full agricultural property relief and business property relief were introduced, the nil rate band at the time of £140,000 would typically cover 56 acres of farmland.
However, the current £325,000 threshold would cover only 29 acres.
Mr Moody added: “Based on average annual inflation of 3% since 2009, it’s easy to see how quickly a lot more farmers will fall into this punitive tax band.”
Farm profitability
At the Oxford Farming Conference on 9 January, Defra secretary Steve Reed spoke about the department’s focus on farm profitability and food security.
However, Mr Reed’s speech was somewhat overshadowed by the sound of tractor horns outside the venue, where farmers came out to protest against the government’s Autumn Budget announcements.
© MAG/Philip Clarke
Country Land and Business Association president Victoria Vyvyan said: “The secretary of state says he wants to improve farm profitability, yet family farms and businesses face having what profits they do make wiped out by inheritance tax bills.
“Capping vital inheritance tax reliefs will threaten their viability and not deliver the growth and investment the government says it wants to achieve.
“Farmers are playing their part in enhancing the environment and delivering public goods, but they also need to be able to run viable, profitable businesses.
“The government’s freezing of the farming budget and lack of ambition for the rural economy is hitting confidence.
“To grow the rural economy, the government must invest in productivity, strike new trade deals and defend farm businesses from drought and flood.”