Inheritance tax may have grabbed the headlines last week, but it isn’t the only policy shafting farmers announced in Rachel Reeves’ budget.
GB News has spoken to several experts to find out what else is in the budget for farmers other than being taxed at 20 per cent on assets over £1million when they die.
Unfortunately for farmers, tax experts, rural lobby groups and business advisors have all warned of several new policies that will hurt them even more.
Taxing double cab-pickup vehicles
One staple of many farmers’ lives is their pick-up.
These vehicles were previously considered ‘goods vehicles’ but have been reclassified in Reeves’ budget to ‘company cars’, a significant change in terms of tax.
This means they are liable to another tax called ‘Benefit in Kind’ (BiK) tax.
The Countryside Alliance, one of Britain’s largest and most influential lobby groups, explained: “It doesn’t just stop with the notorious family farm tax.
“The Countryside Alliance has uncovered another bitter blow for working people, including farmers and gamekeepers, through a new tax bombshell which went largely undetected last week.
“The tax burden on a typical double-cab pickup- the workhorses of many tradespeople- may now rise by as much as 211 per cent, according to our analysis.
“This is because these vehicles will no longer be treated as essential tools of the trade.
“Our number crunchers have found that a typical Nissan Navara Tekna, priced at £33,265 and emitting 167g/km of CO2, will see its BIK rise from £3,960 to £12,308.
“And the BIK on private fuel benefits will also soar from £757 to £10,286, leading to even higher costs for working people.
“It is self-employed tradespeople who will face the biggest blow, as they can only deduct six per cent of their vehicle's cost in the first year, slashing potential tax savings from over £9,600 to just £578.84.
“The decision will hit working people in the countryside beyond hard.”
It’s worth pointing out the previous government tried to enact this but was persuaded not to do so by the motoring industry.
Farm pick ups are an important part of farmers' lives
Getty
Fertiliser Tax
This tax, announced by Reeves in her budget but largely unreported, forms part of the new UK Carbon Border Adjustment Mechanism (CBAM) aimed at reducing the UK’s carbon footprint.
It will be levied on imports like aluminium and cement and, crucially for farmers, fertiliser.
Experts have warned it could up fertiliser costs by an eyewatering £50 a tonne.
Lord Fuller, chairman of Brineflow, a major liquid fertiliser importer, railed: “This is a £150 million raid on farmers. It’s as if the Treasury is only interested in lining its own pockets with farmers’ hard-earned money.”
Critics argue it could devastate the entire food supply chain, hampering the competitiveness of British agriculture on the global stage.
They also point to how it may lead to importing food grown using untaxed fertiliser, effectively offshoring our carbon footprint. In this scenario, the government helps bankrupts British farmers while the global carbon footprint remains unchanged.
Rob Halliday, a farmer in Cornwall, said: “The CBAM is an under-reported kick in the teeth!
“It will tax UK farmers for using fertiliser, whilst there is no control or tax on imported food grown using foreign fertiliser.
“The more we offshore our food production, the less standards and provenance control we have, and ironically, given transport in many cases, the higher the carbon footprint.
“It’s a totally misguided policy.”
Fertiliser prices have already risen sharply over the last few years
Getty
Reducing subsidies to provide more money for environmental projects
This policy aims to reduce the state’s support for farms by slashing something called delinked payments.
Its aim, according to the government’s website, is to channel the money into “environmental land management, focusing on those who are dedicated to sustainability and environmental stewardship.
“The fastest subsidy reductions will apply to those who historically received the largest payments,” the website explains.
“For example, the top 4% of recipients — who received over £100,000 in subsidies in 2020 — will receive no more than £8,000 by 2025.
“In contrast, most farmers, who began with less than £10,000 in payments, will see a gradual reduction in their delinked payments but will continue to have access to funding through SFI and other schemes.
“It is the intention that this approach will enable more farmers to access funding for environmental land management, focusing on those who are dedicated to sustainability and environmental stewardship.”
Country Land and Business Association President Victoria Vyvyan said: “Defra’s proposal to accelerate the end of direct payments would be incredibly damaging to investment in farming and diversified businesses.
“A recent CLA survey found that 80% of respondents said they ‘strongly agreed’ or ‘agreed’ that payments through farming schemes are critical to ensure their businesses stay viable.
“There is enormous growth potential in the countryside, but we need the government to be working with us, not against us.”
Freezing the agriculture budget (a cut in real terms)
The agriculture budget in the UK funds initiatives to support farmers, promote sustainable farming practices, enhance food security, and manage rural development.
However, Reeves has decided to freeze the budget at its 2014 level, not even rising for inflation.
Country Land and Business Association President Victoria Vyvyan said: “The government was elected on a promise of growth but has done nothing for the countryside but freeze the agriculture budget and raise taxes.
“The decision to freeze the budget at the same level since 2014 – a cut in real terms – will have consequences for hard-pressed farmers, consumers and the environment.
“It will damage confidence and stability across the industry, risking farm profitability.
“It could hit sustainable food production and undermine improvements to wildlife habitats, flood management and access to nature.”
Environment Secretary Steve Reed MP represents a constituency in south London
PANot removing VAT on domestic heating oil
Many farms and rural homes in the UK rely on heating oil to warm their homes, but this is subject to VAT.
Critics argue that if Labour were serious about supporting the countryside, they could use powers afforded to them by Brexit to slash VAT to zero, ending the pay disparity between the cost of heating for rural and urban people.
A Countryside Alliance spokesperson explained: “We regret the Chancellor has not taken up our suggestion to use powers returned to the UK following our departure from the EU to reduce the VAT rate on domestic heating oil to zero.
“Similarly, it is disappointing that the government continues with its intention to restrict eligibility for the Winter Fuel Payment without taking into consideration the higher heating costs faced by many living in rural properties.
“This can only exacerbate the rural premium- that is the added costs of living that rural residents must pay.
“We continue to argue that the government should look at assessing income independently of benefit eligibility and thus could take account of those residing in rural properties, or alternatively for properties off the gas grid, which would go some way to addressing the disparity in heating costs”.
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Not forgetting IHT...
If farmers manage to navigate all these added pressures imposed by Reeves’ budget, they still face a 20 per cent tax on assets over £1million when they die, the headline revelation from Reeves’ bombshell budget.
Critics say this will saddle farmers’ children with huge tax bills when their parents die and leave their asset-rich but cash-poor farms to them.
As a result, farmers will be forced to sell chunks of land to foot the bill, breaking up land that has been passing down through families for generations, damaging the fabric of Britain’s countryside and worsening our food security.
Labour argues their tax is to stop wealthy people buying up farmland to avoid inheritance tax and that is a fair and balanced way to plug the £22billion black hole.
A row is ensuing between Labour and the Farming Union with demonstrations planned for November 19.
Today, a petition calling to ‘overturn the family farm tax’ reached 150,000 signatures.
