Ag industry warns against ‘hammer blow’ in capital taxes

Industry leaders are urging the Labour government to avoid cuts to the agricultural Budget and preserve agricultural property relief, as farmers grapple with extreme weather, lower arable prices and high input costs.

Chancellor Rachel Reeves is set to outline the government’s spending plans for agriculture, including potential changes to capital gains tax (CGT) and inheritance tax (IHT), in her budget announcement on Wednesday 30 October.

This comes at a critical time for farmers, who are reeling from increased tax bills from the 2022 harvest and two disappointing harvests since then.

See also: Farmers urged to stock up with fuel ahead of budget

The high costs of machinery and production are exacerbating a cashflow crisis, with concerns mounting about prospects for the 2025 harvest following weeks of relentless wet weather.

Gary Markham, director of Cambridgeshire-based accountants Land Family Business, said: “Many in the farming industry are already on their knees and the last thing we want now is a Budget that’s going to hit family farms.

“Many of them are really worried about their future in the industry.

“Confidence is very low and the Labour government needs to recognise that these family farms are producing food for the nation.”

Sir Keir Starmer’s government is reportedly considering a shake-up of agricultural property relief (APR) from IHT, a move that could severely impact family farms and their succession plans.

Currently, APR allows land and property to be passed down tax-free, which is vital for maintaining family farming businesses.

However, if abolished, Mr Markham warns it would deliver a “sledgehammer blow” to many farming operations, potentially forcing families to sell their land upon the owners’ death.

CLA warning

Ahead of the Budget, the Country Land and Business Association (CLA) is encouraging farmers to write to their MPs, stressing how scrapping IHT would destroy family farms and jeopardise the country’s food security.

CLA president Victoria Vyvyan said: “If the government rips the rug from under hardworking farmers by removing these reliefs, it would be a catastrophic betrayal.”

Despite the government’s promises of a “new deal” for British farmers to enhance rural economic growth, strengthen food security and improve the environment, many farmers remain sceptical, particularly as flood-hit farms in England await promised recovery funds.

The government has also faced criticism for changing policies on sugar tariffs, dairy contracts and Seasonal Workers visas.

NFU president Tom Bradshaw has urged Sir Keir to introduce a multi-year agricultural budget of £5.6bn, up from £3.1bn, while retaining APR.

He warned that losing APR could equate to a “family farm tax”, devastating for family farms and new entrants to the sector.

The NFU is also pushing for adequate funding for the Farming and Countryside Programme, the maintenance of flood defences and the government’s new bovine TB strategy.

Labour ‘inaction’

Shadow Defra farming minister Robbie Moore criticised the Labour government for its lack of action on key farming policies since taking office.

He pointed out that critical funds, including the £50m Farming Recovery Fund and £75m for internal drainage boards, remain undelivered, and the £220m for farm innovation and productivity grants has not been re-committed.

“My message to the secretary of state [Steve Reed] is clear: pick up the phone, speak to the chancellor with urgency, and make it clear that our farming budget should be maintained, if not enhanced,” said Mr Moore.