Why are a tiny number of rich farmers dominating the news cycle?

[InvisibleRadiator]

I've been reading around this inheritance tax issue, and the more I read the more I agree with government policy!

For starters the government thinks this will only affect the 500 richest farms and some think this could be as low as 100 farms!
x.com/DanNeidle/status/1852064433738256394

How on earth have such a rich elite managed to whip everyone up into such a frenzy, making it sound like poor old farmer Giles's kids are going to have to sell the family farm when he dies.
The following article explains how when taking into account the IHT property exemption, a married farming couple would not pay IHT unless their assets exceeded £3 million!
www.independent.co.uk/news/business/inheritance-tax-farmers-protest-maths-b2649181.html

And there are so many concessions such as having 10 years to pay, and being half the rate most others pay! And there are many ways to legally reduce the impact of the tax.

It's clear that wealthy investors have been pushing up land prices, and apparently farmers are involved in less than half the land sales now, when compared to 15 years ago.

And now this tiny band of super rich are trying to plead poverty? I don't believe a word of it.

This final article puts it far more eloquently than I ever could.
www.theguardian.com/commentisfree/2024/nov/17/farmers-have-hoarded-land-for-too-long-inheritance-tax-will-bring-new-life-to-rural-britain

Good on Labour for standing up for the average person and trying to claw back a tiny portion of generations of inherited wealth for our public services!

@InvisibleRadiator you haven't read around it very well. It doesn't only affect the top 500 farms, it's 500 farms per year. It actually says that in your first linked (and misquoted) tweet.

Well the economics are such that the price of agricultural land will fall as it’s no longer a desirable portfolio IHT avoiding asset.

This means that the crazy farm economics will be readjusted and the return / product value on farm land will be proportional to its value. Farmers will be able to expand and buy more land cheaply as opposed to it being bought by tax avoiding billionaires.

Farmers will have lower worth on paper but won’t loose their farms. If anything they will show a better return on capital investment.

As things stand farming is unprofitable because the return on capital investment or land is unsustainable because of the crazy hike in land prices in the last few years to avoid IHT.

Moreover the right to farm is not inheritors and frankly the reduction in farm land value might allow other non farming families to get involved. There is an arrogance and monopoly trait to farming that you don’t get in other businesses.

Farmers can be created as they were back in the 1930s or 1950s. Now they are just banks of land.

I think the policy is appalling sorry I disagree. An asset only has value when sold. The farm is the entire asset. Every bit is used. You can’t just sell off bits to pay the tax. It doesn’t work like that. Who values the land? Why does the land have these stupid valuations. If you were valuing a business which only make an income of £40k a year, you wouldn’t then value it as £3 million. If you hope that all the farmland will be sold then houses are built then fine but I don’t. I don’t want even an inch of green belt land built on. The policy could easily just be a very high capital gains tax when the land is sold by descendants to stop rich investors just buying land to avoid inheritance tax. I don’t own anything like £3million but I don’t get jealous just because a farmer would notionally have an asset worth that.

Oh stop being silly.

The govt can use legislation to make it harder to develop farmland. There's already legislation protecting the best farm land.

This is just stupid doom mongering

I have friends whose families own farms and the whole farm is rented out to a tenant farmer/tenant farmers. I don't see why that's any different from someone who owns commercial investment properties.

This is part of the problem though.
It doesn’t take a lot for a farm to be worth £6m in terms of land and buildings, and if machinery and livestock are counted into it. It still may not be a hugely profitable business.
Finding £60k a year to live on is likely to be difficult, let alone finding it to pay off IHT.
So land has to be sold, then the farm is smaller and less viable, and the land is likely to be out of food production.
The very wealthy can manage this, but a £6m farm doesn’t equal wealthy farmer, and farms will be lost due to this assumption.

I’m not being silly. Thanks though

Exactly.

Will farms be lost or will others buy the land to farm?

Or will farmers just use their brains and gift their farms in reasonable time before their deaths? Or incorporate?

Or do these decisions not apply to farmers in the same way as they do to the rest of us who get to pay the full 40% within 6 months?

If a farm only produces say £80,000 on 3.5 million pounds of land it’s not a sustainable option. However if the land value was reduced to show its true worth ( as opposed to being bought by some ex pat billionaire for 3.5 million) it will actually encourage more farming because land values will fall dramatically. Land values are artificially kept high or inflated due to the IHT tax break.

The only people interested in farming will then be farmers and also those companies hoping to turn land into renewable energy production. ( although with the advancement in solar as researched by Oxford University that will increasingly be seen as the Betamax of energy production). So in 20 years time, solar farms will be gone, billionaires won’t be interested in farm land and farmers can do what they do which is buy bigger land holdings and achieve economy of scale as the value of farm land rapidly diminishes.

If I was a farmer I would be rejoicing as a large component of production costs will become a lot cheaper ie land and there is a chance to expand as the billionaires sell up. Therefore more food production in a more economic way .

Not in favour. Not all farmers are married so not a lot of relief if you are single. Would you prefer the land was all sold to pay a tax bill and swathes of arable land used for housing? Or bought up by even richer individuals or corporations (who could be foreign) who have their own agendas and could simply turn off the food producing tap? OP you would be up in arms if there was some legislation that directly targeted and affected your family in this way.

How did farmers manage inheritance taxes before 1984 (which is when the reliefs and the current form of IHT were introduced, I think)? Does anyone know?

Gifting farms isn’t as straightforward as this.
If you gift a property and still live in it you’ll still be expected to pay IHT.

There are ways to set up trusts and maybe set up a farm as a group of businesses, but this can all be difficult and costly to set up.

A typical multi generational farm will need all hands on deck. Old farmers don’t retire, they keep doing what they can until they die or become bedridden. If they’ve gifted a farm they then can’t live in or work on what will they do? Where will they go?

Farming is nothing like other businesses.

All of you in agreement let’s see what response you have when labour raid your pension pots! All the years of planning and saving to enjoy your retirement and maybe pass a little on to your children wiped out by a chancellor who lied on her CV.

Presuming your mum and dad are married at the time of the first death, and presuming the £800,000 includes a house, then yes, you can be left that much without incurring any tax.

No wealthy foreigner will now buy the land as the land now has an IHT value. I doubt this will be reversed with a change of government. In fact as governments see the advantage of this policy the IHT rate will go up as land values fall.

The only speculation on land might be if the land is adjacent to towns and could be built on. However there needs to be more done with brown field sites.

Also there might be more on shore wind but I think solar will be phased out in 20 years because silicone solar panels are now outdated. Solar will be applied to all buildings as per Oxford new tech.

Land values needs to reflect their tru worth as just that - food production. At present they carry crazy speculative value. In that way farms become more profitable.

If I was the Goverment I would probably make all the equipment and farm plant IHT free eg tractors etc but only proportionate to the output of the farm eg 1 million pound output - 200,000 farm equipment IHT allowance.

Agree 100%. It amazing what closing the tax loophole does. They didn't give a shit when schools were crumbling and kids were going hungry...because it didn't effect them. Clarkson even said on record the reason he got the farm was the tax loophole.

Very glad to see so many reasoned points being raised by posters who are supportive of farmers. Farming is one of the basic human activities; it has been necessary forever. For the government to introduce a policy that shows no understanding or support for the way farming works is obscene. I agree that some are in 'farming' for a lifestyle but for the majority it is a daily grind and this feels like a kick in the teeth. Secondary to this have any of you supporting this thought that many farmers live in historic buildings handed down over the years a) they will be worth a packet when valued for estate purposes and b) those who swoop in to buy them will be exactly the sort of people we don't want.

@noras if the aim was to reduce the land values by making it less attractive to rich investors this could be done by a specific tax on sale such as a 40% tax on land value.

you could put a tax on rents the landlord receive if they just invest but don’t farm the land themselves. This could be capped to a percentage of the land value to stop landowners exploiting their tenants.

those are off the top of my head but am sure there are other ways to achieve the aim of making farmland a less attractive investment opportunity and return the land to being a zero value asset other than for a farmer

I think the problem is the use of agricultural land as a tax dodge: rich non-farmers buy it to avoid IHT. I have seen several financial promotions suggesting to do this.

I am genuinely curious: do people on this thread who are in farming policies have suggestions for a policy that would:

1. protect actual family farms from having to sell or shrink farms in order to pay IHT, while also

2. preventing rich non-farmers from using ownership of agricultural land as a tax dodge, AND

3. ensuring that the small number of very wealthy farmers with thousands upon thousand of acres are not giventhea unique privilege of keeping their children, grandchildren and great grandchildren in wealth forever and ever more?

Just to float a trial balloon by way of example could it work if the exemption amount were lifted to (for instance) £5 million to reflect higher land values, but also narrowed to only including farmland where at least one of the deceased owner’s direct descendants is working the land on a full-time basis?

I do realise this could create issues a generation later on if, for instance, a farmer with three children has one child “A” who farms and two children “B” and “C” who do not farm: If B and C wanted to keep 2/3 of the ownership and wanted to pass it on to their own children who also do not farm, then IHT would be due. … but then again, why should the children of B and C receive tax-free ownership of a valuable asset if they do not actually farm?

You're acting like it's a pure free market. Planning laws (and if necessary CPO laws) can be used nsure we use agricultural land for agriculture.

This kind of doom mongering is the same silly threat making as private school parents were making about how state school children would all lose their spaces at the grammars because their precious darlings would take them.

It's not necessary and it's not honest

I have seen plenty of attempts to develop decent farmland blocked.

And the Tories were very developer friendly

Exactly. Farming is often a home and a business. Take away the farm you take away both. And there is immense social and environmental value in ensuring we have sustainable farming at a level which maximises our food security. International events putting up costs of petrol, energy, food, wood and building materials etc should make the risks of this completely obvious. This is not like other IHT scenarios.

Land values have obviously changed since 1984 and the profitability of farming has dropped. Loads of farmers have already exited farming. That needs to be factored in. These struggling small farmers of today are the ones with the healthiest businesses compared to the ones who have already had to sell up. What nonsense that it’s OK because a married couple can leave a joint amount? What about unmarried or widowed farmers? I don’t understand how that’s meant to be reassuring.

I’m really fucked off that that obnoxious creep Jeremy Clarkson is putting his face to this cause, he has nothing to do with small struggling farmers who need support. He’s an arrogant wealthy publicity seeker whose farm is completely unaffected and irrelevant to this.

The VAT placed on education for the first time hasn’t been accompanied by an impact assessment either AFAIK. So let’s hope you’re not speaking too soon or out of pure uncritical political loyalty on this.

The farmers get the one million pound main home allowance to be applied to the value of a farm house.

They also get one million pounds each allowance for the farm itself.

So a potential 3 million pounds exempt. Assuming it’s owned by a husband and wife.

After that they then only pay 20% as opposed to 40% which everyone else pays.

Put it in perspective, your parent have a house in London you would most likely have to sell your family home to pay IHT!

Farmers have seen their wealth bloom
as foreign investors have ploughed in to use the IHt break as a land value bubble. Eventually that was not helpful as farmers need to be able to afford to buy land. Now these investors will withdraw and land will become more affordable.

To help genuine farmers they should look to an equipment tax break on top as I have said.

They need to drive down the price of land but exempt some equipment eg tractors, ploughs etc

I’m not 100% on this, but thinking back to my mid 90s agricultural college days there was a change in the late 80s (happy to be corrected on this) that meant it was far more difficult to make a profit on farming.
Supermarkets were suddenly massive business, if you were a livestock farmer your income was predicted by five men - the meat buyers for the 5 main supermarket chains. They held so much power back then over farmers, who had very few alternative choices.
Before then farmers had more autonomy over where they sold, and prices tended to be higher as they weren’t screwed down by greedy supermarkets.
There was other stuff going on that was screwing farmers, I can’t fully remember, but the 90s were years of diversification as farmers had to find more inventive ways to make a living (it was a real boon for artisan food production, like cheese, ice cream, things like that)
IHT was exempt for farms from 1992 to help support them, as food security is of vital importance.

Then we had the devastating foot and mouth outbreak which further knocked farming back.

Reintroducing IHT right now at a time where few ordinary farmers are making a decent living would knock the industry on its arse yet again, without back up, and at a time when so many people are unwilling to understand farming or even contemplate how important it is to have our own safe food supply here in the UK.

I don’t think anyone here has said the Tories did a good job. Far from it. They gave us Brexit which has made things much harder on farms. But we are where we are and the Tories aren’t in power now, which is a huge relief.