What’s the beef with farmers’ inheritance tax?

Published

9 months ago

November 19, 2024

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Farmers have left the fields for the streets of the capital in protest at changes to inheritance tax that will see death duties payable by some farmers on agricultural and business property.

The Treasury estimates the changes, revealed in the budget, will raise up to £520m a year. Farmers and campaigners say they threaten the future of thousands of multi-generational family farms.

Here, we take a look at the issues involved to explain why farmers are angry.

What is inheritance tax?

Inheritance tax (IHT) is ordinarily payable on estates at 40%. Estates passed to a surviving spouse or civil partner, charity or community sports club are exempt, and there are reliefs on property passed to children, relatives and others.

Estates worth less than £325,000 are not taxed, with a further £175,000 of relief given if a home is left to children or grandchildren, giving a total of £500,000 tax free. Currently around 4% of estates are liable for IHT.

What are the plans for inheritance tax on farmers?

Since 1984 farmers and agricultural land and business owners have been exempt from IHT, thanks to a series of tax “reliefs” that can be applied to estates.

There are two broad categories, both offering 100% relief. Agricultural Property Relief (APR), covers land and farm buildings, and Business Property Relief (BPR) applies to livestock, machinery such as tractors and combine harvesters, and assets developed to diversify income, such as cottages converted to short-term lets, or farm shops.

From 2026 those 100% reliefs will end, replaced by limited relief for farmers on more generous terms than general IHT.

Estates will receive relief of £1m, with up to £500,000 of additional relief, as with non-farming estates. If a farm is jointly-owned by a couple in a marriage or civil partnership, the relief doubles from £1.5m to £3m.

Any tax owed beyond the level of relief will be charged at 20%, half the standard 40%. If farms are gifted to family members at least seven years before death no IHT is payable.

Why is the government acting?

Those generous reliefs have made agriculture an attractive investment for those seeking to shelter wealth from the taxman. Jeremy Clarkson, the UK’s highest profile farmer – and opponent of the government’s plans – said as much when promoting his Amazon series about becoming the proprietor of Diddly Squat Farm in Oxfordshire.

“Land is a better investment than any bank can offer. The government doesn’t get any of my money when I die. And the price of the food that I grow can only go up,” he told the Times.

Mr Clarkson is far from alone. Private and institutional investors, along with so-called “lifestyle” farmers funding purchases from previous careers, like the former Top Gear presenter and his Oxfordshire neighbour, the Blur bassist Alex James, now dominate agricultural land purchases.

Figures from land agents Strutt & Parker show those three categories made up more than half of all agricultural land purchases in England last year, with just 47% bought by traditional farmers.

In the first three quarters of this year the figure is down to 31%, fewer than the 35% of purchases made by private investors. (Strutt & Parker stress that less than 1% of land changes hands every year and the majority remains in the hands of farmers and traditional landowners.)

The most valuable estates also receive the lion’s share of tax relief. Analysis by the Resolution Foundation shows 6% of estates worth more than £2.5m claimed 35% of APR, and 4% of the most valuable accounted for 53% of BPR in 2020.

In the budget the Treasury said “it is not fair or sustainable for a very small number of claimants each year to claim such a significant amount of relief”.

How many farms does the government say will be affected?

The government says around a quarter of farms will be impacted by the changes, based on the annual tally of claims for Agricultural Property Relief and Business Property Relief made in the event of a farm owners’ death.

The latest figures for APR, for 2021-22, show that for estates worth more than £1m and therefore potentially exposed to the new regime, there were 462 claims, 27% of the total.

More than 340 claims were in the £1m-£2.5m band, with 37 claims from estates claiming more than £5m of relief, at an average of £6.35m.

For Business Property Relief, which also includes shares held on unlisted markets including the London AIM market, there were 552 claims for more than £1m, or 13% of the total, with 63 claims worth more than £5m in relief, at an average value of £8m.

While ministers insist smaller farms will be protected, the merging of APR and BPR seems certain to increase the value of estates for IHT purposes. New tractors and combine harvesters are six-figure investments, and farmers say rising land values mean the reliefs are less generous than the government maintains.

What do farmers say?

Farmers and campaigners say the government’s figures are far too low. The Country Landowners Association estimates 70,000 farms could be affected, a figure reached by multiplying average arable land value by the average farm size that they conceded should be treated with caution.

The National Farmers’ Union points to figures from the Department for Environment, Farming and Rural Affairs, which show 49% of farms in England had a net value of more than £1.5m. On that basis almost 50,000 farm owners may need to consult an accountant.

The NFU’s central point is that the economics of farming mean levying inheritance tax could be ruinous for many. While farmers and agricultural landowners are asset rich, courtesy of their land, property and equipment, they are cash poor.

Average income in every category of cropping farms declined in 2023, with cereals revenue falling by 200% year-on-year, and average earnings across the board of less than £50,000.

For farms with meagre incomes facing hefty IHT bills and no tax planning, land sales may be the only option. That could be terminal for some family dynasties, but it would make IHT the final straw, rather than the root cause in an industry that, for far too many farmers, simply does not pay.

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Tesla approves $29bn share award to Elon Musk

Published

11 hours ago

August 4, 2025

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Tesla approves bn share award to Elon Musk

Tesla’s board has signed off a $29bn (£21.8bn) share award to Elon Musk after a court blocked an earlier package worth almost double that sum.

The new award, which amounts to 96 million new shares, is not just about keeping the electric vehicle (EV) firm’s founder in the driving seat as chief executive.

The new stock will also bolster his voting power from a current level of 13%.

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He and other shareholders have long argued that boosting his interest in the company is key to maintaining his focus after a foray into the trappings of political power at Donald Trump‘s side – a relationship that has now turned sour.

Musk is angry at the president’s tax cut and spending plans, known as the big beautiful bill. Tesla has also suffered a sales backlash as a result of Musk’s past association with Mr Trump and role in cutting federal government spending.

The company is currently focused on the roll out of a new cheaper model in a bid to boost flagging sales and challenge steep competition, particularly from China.

The headwinds have been made stronger as the Trump administration has cut support for EVs, with Musk admitting last month that it could lead to a “few rough quarters” for the company.

Tesla is currently running trials of its self-driving software and revenues are not set to reflect the anticipated rollout until late next year.

Musk had been in line for a share award worth over $50bn back in 2018 – the biggest compensation package ever seen globally.

But the board’s decision was voided by a judge in Delaware following a protracted legal fight. There is still a continuing appeal process.

Earlier this year, Tesla said its board had formed a special committee to consider some compensation matters involving Musk, without disclosing details.

The special committee said in the filing on Monday: “While we recognize Elon’s business ventures, interests and other potential demands on his time and attention are extensive and wide-ranging… we are confident that this award will incentivize Elon to remain at Tesla”.

It added that if the Delaware courts fully reinstate the 2018 “performance award”, the new interim grant would either be forfeited or offset to ensure no “double dip”.

The new compensation package is subject to shareholder approval.

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Motor finance operators can breathe big sigh of relief

Published

11 hours ago

August 4, 2025

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Motor finance operators can breathe big sigh of relief

Bank stocks have enjoyed a boost as traders digest the Supreme Court’s ruling on the car finance scandal.

Some of the country’s most exposed lenders, including Lloyds and Close Brothers, saw their share prices jump by 7.55% and 21.62% respectively.

It came after the court delivered a reprieve from a possible £44bn compensation bill.

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Banks will still most likely have to fork out over discretionary commissions – a type of commission for dealers that was linked to how high an interest rate they could get from customers.

The FCA, which banned the practice in 2021, is currently consulting on a redress scheme but the final bill is unlikely to exceed £18bn. Overall, the result has been better than expected for the banks.

Lloyds, which owns the country’s largest car finance provider Black Horse, had set aside £1.2bn to cover compensation payouts.

Following the judgment, the bank said it “currently believes that if there is any change to the provision, it is unlikely to be material in the context of the group”.

The judgment released some of the anxiety that has been weighing over the Bank’s share price.

Jonathan Pierce, banking analyst at Jefferies, said the FCA’s prediction was “consistent with our estimates, and most importantly, we think it largely de-risks Lloyds’ shares from the ‘motor issue'”.

Bank stocks have responded robustly to each twist and turn in this tale, sinking after the Court of Appeal turned against them and jumping (as much as 8% in the case of Close Brothers) when the Supreme Court allowed the appeal hearing.

Concerns about this volatility motivated the Supreme Court to deliver its judgment late in the afternoon so that traders would have time to absorb the news.

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FCA considering compensation scheme over car finance scandal – raising hopes of payouts for motorists

Published

1 day ago

August 3, 2025

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FCA considering compensation scheme over car finance scandal - raising hopes of payouts for motorists

Thousands of motorists who bought cars on finance before 2021 could be set for payouts as the Financial Conduct Authority (FCA) has said it will consult on a compensation scheme.

In a statement released on Sunday, the FCA said its review of the past use of motor finance “has shown that many firms were not complying with the law or our disclosure rules that were in force when they sold loans to consumers”.

“Where consumers have lost out, they should be appropriately compensated in an orderly, consistent and efficient way,” the statement continued.

The FCA said it estimates the cost of any scheme, including compensation and administrative costs, to be no lower than £9bn – adding that a total cost of £13.5bn is “more plausible”.

It is unclear how many people could be eligible for a pay-out. The authority estimates most individuals will probably receive less than £950 in compensation.

The consultation will be published by early October and any scheme will be finalised in time for people to start receiving compensation next year.

What motorists should do next

The FCA says you may be affected if you bought a car under a finance scheme, including hire purchase agreements, before 28 January 2021.

Anyone who has already complained does not need to do anything.

The authority added: “Consumers concerned that they were not told about commission, and who think they may have paid too much for the finance, should complain now.”

Its website advises drivers to complain to their finance provider first.

If you’re unhappy with the response, you can then contact the Financial Ombudsman.

The FCA has said any compensation scheme will be easy to participate in, without drivers needing to use a claims management company or law firm.

It has warned motorists that doing so could end up costing you 30% of any compensation in fees.

The announcement comes after the Supreme Court ruled on a separate, but similar, case on Friday.

The court overturned a ruling that would have meant millions of motorists could have been due compensation over “secret” commission payments made to car dealers as part of finance arrangements.

The FCA’s case concerns discretionary commission arrangements (DCAs) – a practice banned in 2021.

Under these arrangements, brokers and dealers increased the amount of interest they earned without telling buyers and received more commission for it. This is said to have then incentivised sellers to maximise interest rates.

In light of the Supreme Court’s judgment, any compensation scheme could also cover non-discretionary commission arrangements, the FCA has said. These arrangements are ones where the buyer’s interest rate did not impact the dealer’s commission.

This is because part of the court’s ruling “makes clear that non-disclosure of other facts relating to the commission can make the relationship [between a salesperson and buyer] unfair,” it said.

It was previously estimated that about 40% of car finance deals included DCAs while 99% involved a commission payment to a broker.

Nikhil Rathi, chief executive of the FCA, said: “It is clear that some firms have broken the law and our rules. It’s fair for their customers to be compensated.

“We also want to ensure that the market, relied on by millions each year, can continue to work well and consumers can get a fair deal.”