How Law Students Can Decide Which Modules to Pick
November 30, 2024
Article by Jaspreet Bassi
Traditionally, farmers have been able to pass on their property, including land used for crops and animals, to their children or grandchildren without having to pay any tax. However, in the autumn budget, the Chancellor announced reforms to inheritance tax relief on agricultural land. The new rules for farmers mean that farms worth more than £1 million will face an inheritance tax rate of 20%. For example, if a farm is valued at £2 million, the first £1 million would be exempt from tax, and every pound over that is taxed at 20%, meaning the farm would owe £200,000 in tax.
The government has stated that the reforms to inheritance tax will protect small family farms, with the tax mostly set to affect the wealthiest 500 estates. Moreover, ministers have said related tax allowances will push the payment threshold to £3 million. Despite this reassurance, the National Farmers Union argues that the changes will undermine the government’s relationship with rural farmers and reduce investment in the farming sector. For example, farmers have said that although they are asset-rich, they are often cash-poor. Farmers say that the reform could affect the next generation’s ability to carry on producing food with concerns that they could be forced to sell their land to pay for the tax.
Supporters of the reform argue that the reform will close a loophole to stop rich people from investing in land to reduce their inheritance bills. This, in turn, might provide young farmers, who are often crowded out of the market, with the opportunity to buy land. This creates the prospect of a levelling off in farm rents. Moreover, the money received by the government from the tax might help to improve public services. Additionally, some take the view that wealth should be enjoyed in a societal context, and so an individual is not entitled to inherit everything without paying some levy on their inherited wealth.
This news will impact commercial law firms that have a private wealth practice. For example, farmers might seek property tax advice from lawyers to see how they can optimise allowances and reliefs and mitigate liabilities as part of an overarching tax plan.
Sources
https://www.theguardian.com/environment/2024/nov/17/you-betrayed-us-how-uk-farmers-swiftly-turned-on-labour-over-inheritance-tax-plans
https://www.youtube.com/watch?v=HC9N3klIjr0
https://www.theguardian.com/commentisfree/2024/nov/17/farmers-have-hoarded-land-for-too-long-inheritance-tax-will-bring-new-life-to-rural-britain
