Key Takeaways:
- The UK government has announced a U-turn on inheritance tax for farmers, raising the threshold from £1m to £2.5m
- The move was announced in a press release two days before Christmas, with the opposition accusing the government of trying to dodge scrutiny
- The change is expected to reduce the amount of money raised from £430m to £300m
- The National Farmers’ Union has welcomed the announcement, but the opposition is seeking clarity on how the tax will apply
- The government’s U-turn comes after months of pressure from farmers, campaigners, and some Labour MPs
Introduction to the Inheritance Tax U-Turn
The UK government has made a surprise announcement regarding inheritance tax for farmers, revealing that they will be raising the threshold from £1m to £2.5m. This move has been met with a mixture of relief and skepticism, with the opposition accusing the government of trying to dodge scrutiny by announcing the change just two days before Christmas. The shadow environment secretary, Victoria Atkins, has criticized the government for attempting to "sneak out" the announcement, which was made in a press release from the environment department.
Background to the Inheritance Tax Debate
The debate over inheritance tax for farmers has been ongoing for several months, with farmers, campaigners, and some Labour MPs putting pressure on the government to reverse its decision to tax inherited agricultural assets worth more than £1m at a rate of 20%. The chancellor, Rachel Reeves, had initially announced the plan at last year’s budget, but faced significant opposition from rural areas, where farmers warned that the tax would have a devastating impact on their livelihoods. The National Farmers’ Union (NFU) had also flagged concerns that some farmers were contemplating suicide over the changes, which were scheduled to be debated in parliament next month.
The Government’s U-Turn
In response to the mounting pressure, the environment secretary, Emma Reynolds, announced on Tuesday that the government would be raising the threshold at which the tax applies from £1m to £2.5m. This move is expected to reduce the amount of money raised from £430m to £300m, although officials have not revealed where the extra money will come from. The NFU president, Tom Bradshaw, has welcomed the announcement, describing it as a "huge relief to many" farmers. However, the opposition is seeking clarity on how the tax will apply, with Victoria Atkins warning that some farms may still struggle to pay the tax bill, even with the increased threshold.
Reaction to the U-Turn
The opposition has accused the government of trying to dodge scrutiny by announcing the U-turn just before Christmas, when parliament is in recess and many people are distracted by holiday preparations. Atkins has criticized the government for not providing sufficient explanation for the change, and for not sending the secretary of state out to explain the policy to the nation. The Conservatives have also refused to say whether they would remove the tax altogether should they win power at the next election, with Atkins stating that the party needs clarity from the government on how the tax will apply before making any commitments.
Implications of the U-Turn
The government’s U-turn on inheritance tax for farmers has significant implications for the agricultural industry and the wider economy. The reduced threshold is expected to benefit many farmers, who will no longer have to pay the tax on inherited assets worth up to £2.5m. However, the opposition is warning that some farms may still struggle to pay the tax bill, and that the government needs to provide more clarity on how the tax will apply. The U-turn also raises questions about the government’s fiscal policy, with the £130m that has been foregone representing a small fraction of the £22bn of headroom that the chancellor has against her own fiscal rules.
Conclusion
In conclusion, the UK government’s U-turn on inheritance tax for farmers is a significant development that has been met with a mixture of relief and skepticism. While the increased threshold is expected to benefit many farmers, the opposition is seeking clarity on how the tax will apply and warning that some farms may still struggle to pay the tax bill. The government’s decision to announce the U-turn just before Christmas has also been criticized, with the opposition accusing them of trying to dodge scrutiny. As the debate over inheritance tax for farmers continues, it remains to be seen how the government’s U-turn will impact the agricultural industry and the wider economy.