The Institute for Fiscal Studies (IFS) has proposed a temporary inheritance tax holiday for farmers, addressing concerns over recent government changes to agricultural taxation. This recommendation comes in response to Chancellor Rachel Reeves’ controversial budget announcement that farmers with businesses valued above £1 million could face a 20% inheritance tax burden.
The policy shift has sparked significant backlash, culminating in tractor protests outside Parliament. The IFS analysis suggests that while equalising agricultural assets with other taxable assets is fundamentally sound, special considerations are needed to protect food security and prevent unfair treatment of elderly farmers.
David Sturrock, senior research economist at the IFS, highlighted a critical timing issue. Farm owners who pass away within seven years after the April 2026 implementation date would have no opportunity to utilise lifetime gifting strategies to mitigate tax exposure. The IFS proposes making lifetime gifts of agricultural property tax-free if made before a specified future date, regardless of when the death occurs.
Treasury officials are reportedly examining potential modifications, including revised gifting rules for farmers aged over 80. This would enable them to transfer farm ownership to family members without the current seven-year survival requirement. However, Chancellor Reeves appears resolute in maintaining the policy’s core structure.
Tax expert Dan Neidle’s research indicates the current proposal disproportionately affects working farmers rather than wealthy investors. His alternative suggestion includes a 40% inheritance tax rate, payable only upon land sale, coupled with a higher tax threshold of approximately £20 million to protect family farming operations.
The Treasury maintains its stance, citing the IFS’s initial assessment of existing rules as inefficient and inequitable. Despite mounting pressure from agricultural communities and opposition parties, the government remains committed to implementing the policy without significant alterations.
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