Kent’s farming community reacts to new inheritance tax rules
Changes, announced in the Autumn Budget, have sent shock waves through the farming community
Changes to inheritance tax rules, announced in the Autumn Budget, have sent shock waves through Kent’s farming community, amid fears it “will rip out the heart” of the garden of England.
Families who spent generations building up their farm businesses to put food on a plate for the nation, often on very tight profit margins, now face the “destruction” of their way of life. Reporter Simon Finlay assesses what the real consequences of the changes might be…
Vaudeville performer, Will Rogers, who was brought up on a ranch in Oologah, Oklahoma, once said the “the farmer has to be an optimist or he wouldn’t be still be a farmer”.
The Chancellor of the Exchequer, Rachel Reeves, stands accused of up-ending the agriculture sector with reforms to the inheritance tax system, which once allowed farming families to pass their land and buildings to their offspring without punitive charges.
Now farms will need to pay a tax rate of 20% of agricultural assets, both land and property, valued over £1million. Although the Government has said the reforms will only affect 2,000 estates each year, with small farms unimpacted.
But, speaking to farm owners, there is a feeling the new Labour administration neither understands nor cares about farming or farmers; for their role in the rural community; the family ties and traditions or their respect for the countryside.
But this new tax seems to have sent a real shiver through the industry with grim realisations that farms may have to sell up and face the uncertainties of the future.
Michael Sargent, 71, grew up on a farm in Norfolk, but met his future wife Rosemary at Wye College.
He moved into her father’s White House Farm, near Biddenden, where there are now three generations living.
The family has 196 acres, rents 300 more, and makes its money from selling milk from 210 pedigree Jersey cows, a herd started in 1963 with just two beasts from Ashford market.
Today, the farm employs very expensive, milking ‘robots’ which cost the guts of £100,000 each while another unmanned craft worth £15,000 bowls up and down the byre’s outer edges nudging back in place feed displaced by the cows’ noses.
Depending on the HMRC’s district valuer’s assessment, the inheritance tax bill could be as high as £800,000.
“I haven’t got that sort of money, have you?, Mr Sargent says. “It’s a very uncertain time for farming. Not sure the government knows what the changes might mean for us.
“Looking at it, if me and Rosemary did ourselves in, it would solve the problem. I’m not saying I would do it, but you can see it happening.”
It’s a very real concern with reports of one farmer in South Yorkshire taking their own life in the days leading up to the Budget.
Mr Sargent’s son Peter, a 40-year-old father-of-two, speaks enthusiastically about the success of the business over the generations but fears much of Kent’s farmland, including his own, will end up under houses or massive tracts of solar panels.
“Where is the food going to come from, then?,” he asks, “There is so much global instability around food and we need to be producing as much of it as we can. It’s a fragile world.
“But farmers are being backed into a situation of either we sell up or sell the land to pay the tax but be left with an unviable business or have an unserviceable debt on a small profit margin. Most won’t be able to.
“This will rip out the heart of Kent and rural England.”
The National Farmers’ Union (NFU) says the Treasury claims that 73% of farms will be unaffected by the £1million agricultural property relief threshold.
But the Department for Environment, Food and Rural Affairs' own figures show that only 34% of farms are worth under £1million.
Conservative county councillor for Sandwich, Sue Chandler, has been in and around farming all her life. Like Mr Sargent she hails from Norfolk rural stock and she too met her husband at agricultural college.
Two generations run the family fruit, livestock and arable business not far from the village of Ash and has been in the same hands since the last war.
“There is a considerable amount of apprehension,” Cllr Chandler says. “There is, in theory, a period of consultation and, as always, the devil is going to be in the detail.
“Farming is a long-term business and if you don’t know what’s going to happen, are you going to invest in it?”
“Land, for farmers, is their working capital. It will depend very much on the (HMRC) district valuers’ involvement in the calculation for inheritance tax. But in Kent, if the farm is anywhere near a sizeable population, the land may increase in value because of the potential for development.
Cllr Chandler branded it a “tax-raising ploy” which she says is unlikely to raise the government the kind of tax they think it will because, she adds, “they haven’t done their homework”.
“The government doesn’t understand farming or farmers,” the county councillor continued. “Even the government departments can’t agree – they haven’t even done the basics.
“Most of the MPs in this current government come from an urban background, rather than rural areas. But they should care and should care very much in terms of food sustainability, the rural economy and rural communities.”
When Katie Lam was selected as a Conservative candidate to be the first MP for the new constituency of the Weald of Kent in July, she readily admits she knew little of rural ways.
Well, she does now and she’s on a mission, facing in opposition farming’s biggest crisis since entire herds of cattle were put down and burnt in massive fire pits and pyres during the foot and mouth outbreak of 2001.
The outlook for her constituents is existential, she says.
Standing by the milking shed at the Sargents’ farm, the MP goes on: “If this ends up meaning that entire farms are sold off to generate cash what will come in their place will either be some sort of mega-farm agricultural complex or lots and lots of houses in inappropriate places.
“The huge risk is that when it’s gone you can’t get it back, you can’t recreate that.
“It has taken 50 years to build up the herd here on the Sargents’ farm and a thousand years to build up the Kentish farming landscape. The way of life here is as old as the Magna Carta.
“The nature of this constituency is that it is entirely built on agriculture and woven into how we live.”
The Country Land and Business Association (CLA) says sold-off farms will end up in the lands of huge corporations buying carbon offsets, lifestyle buyers or local authorities hungry for land supply for development.
South-east regional director, Tim Bamford, says: “Environmental charities may also step in, using the land for ecosystem services, biodiversity projects, and new habitats. Unlike farmers, they’ll face no inheritance tax.
“We know from experience that all these options can lead to responsible land stewardship. But each risks breaking the vital link between the land and those who know it best – those who live and work on it every day.”
NFU President, Tom Bradshaw, said fruit growers are going to feel hit hard and the £1million threshold is nowhere near enough to match the sector’s high capital investment in refrigeration and pack houses.
Mr Bradshaw says: “Businesses had no chance to prepare. The government will have to realise they’ve got this wrong.”
The NFU argues that few viable farms are worth under £1million.
Addressing fruit growers in Kent the other day, Mr Bradshaw told them: “The government needs to know, from all of you, that they do have a fight on their hands. Make sure your MPs know what this means for you, your family and your business.
“The only way they will recognise they have got this wrong is through a groundswell of support right across the UK, that makes them think again.
“The public are incredibly supportive of what we’re doing in this country and they want access to more British food, and you want to supply more British food.”
According to the government website, Chancellor Rachel Reeves announced on October 30 agriculture property relief (APR) will be reformed, 100% tax-free inheritance tax relief is to be restricted to the first £1million of farm property assets.
Above this amount, landowners will pay inheritance tax at a reduced rate of 20%, rather than the standard 40%, which can be paid in instalments interest free over 10 years.
The website adds: “This is on top of all the other spousal exemptions and nil-rate bands that people can access for inheritance tax too. This means that two people with farmland, depending on their circumstances, can pass on up to £3 million without paying any inheritance tax.”
The government claims the present system allows the top 7% to account for 40% of relief.
It adds “It is not fair for a very small number of claimants each year to claim such a significant amount of relief, when this money could better be used to fund our public services.”