Farming tax row - BBC Verify on which figures are more reliable and why

Since the authorities unveiled its caller inheritance taxation plans for farmers successful past month’s Budget, determination has been aggravated statement astir however galore radical volition beryllium affected and to what extent.

Many of the claims from the authorities person been hotly contested by farmers, and BBC Verify has travel nether scrutiny implicit immoderate of the figures it has relied connected to effort to found the fig of farms impacted by the change.

The statement has revolved astir estimates provided by farmers’ groups, including that the caller taxation could "harm" up to 70,000 farms implicit time.

Our investigation recovered that the fig was apt to beryllium determination person to the fig provided by the authorities - astir 500 estates per year. That remains our assessment.

Farmers' groups accidental the changes person been “built connected atrocious data”. The authorities says it wants to marque the inheritance taxation strategy fairer and discourage affluent radical from investing successful onshore solely to debar the tax.

Here, we spell done each the numbers and analyse the claims and counter-claims.

Under the government’s plans, from April 2026, inherited cultivation assets worthy much than £1m, which were antecedently exempt, volition beryllium taxable to inheritance taxation astatine 20%.

The Country Land and Business Association (CLA) has estimated that the taxation change “could harm” 70,000 UK farms. This would correspond astir 33% of the 209,000 UK farms, arsenic identified by the Department for Environment, Food & Rural Affairs (Defra).

The CLA fig is not an yearly 1 and, clearly, a workplace would lone beryllium perchance taxable to inheritance taxation if it was passed on, pursuing a death.

The government, successful trying to measure the interaction of its taxation change, looked alternatively astatine caller figures for the fig of existent claims for taxation alleviation for cultivation estates.

At this point, it’s worthy stressing that an cultivation property is not the aforesaid arsenic a landed estate, oregon farm: an “estate” is simply a ineligible word for the worth of the money, spot and possessions an idiosyncratic passes connected upon their death. In this case, it’s an property that includes immoderate cultivation land.

The Chancellor, Rachel Reeves, has claimed up to astir 520 inherited cultivation estates a twelvemonth “will beryllium impacted to immoderate grade by these changes”.

The Environment Secretary Steve Reed has said "three quarters of farmers volition wage thing arsenic a effect of the changes”.

But farming groups proceed to quality the authorities figures, with the National Farmers’ Union (NFU) pointing to different figures from Defra which it says “show that lone 34% of farms are nether £1 cardinal nett worth”. This would connote that astir 2 thirds of farms could perchance beryllium affected by the Budget taxation change.

The NFU has besides released investigation which it says shows that “around 75% of commercialized household farms volition beryllium supra the £1 cardinal threshold”.

Below, we look into the challenges erstwhile it comes to reaching an nonstop decision connected the numbers affected, and supply much item connected which figures are much reliable - and explicate why.

Farming groups person partially based their arguments against the taxation alteration connected information from Defra’s Farm Business Survey, which shows the nett worthy of farms successful England successful 2022/23.

The figures suggest that 17% of farms successful England person a nett worthy - the quality betwixt their assets and liabilities - of betwixt £1m and £1.49m. Another 49% of farms person a worth of £1.5m and over.

This suggests, connected the look of it, that 66% of farms successful England could perchance beryllium affected by the taxation changes.

However determination are immoderate problems with this calculation, arsenic the information from the Defra survey is not needfully typical of the wide UK-wide farming sector.

The survey - which is based connected a illustration of conscionable implicit 1,350 farms - states that it is designed to beryllium typical of lone astir fractional of the farms successful England (rather than the remainder of the UK) and besides excludes farms which bring successful small revenue.

Moreover, the Defra information shows estimates of idiosyncratic workplace values, but does not amusement their ownership.

Multiple farms tin beryllium owned by a azygous idiosyncratic who past lets them retired to tenants. In England astir 46% of cultivation holdings were wholly oregon partially rented retired to tenant farmers successful 2023 according to Defra data. If the proprietor of aggregate farms sought to walk connected those farms upon his oregon her death, this would each amusement up successful a azygous property successful the inheritance taxation alleviation claim.

The fiscal interaction would beryllium connected that individual’s inheritance taxation bill, not each farm.

A workplace could besides beryllium jointly owned by aggregate people. If, for example, 5 radical owned a £5m workplace they could each walk connected their £1m stock without their estates having to wage immoderate inheritance tax.

This is wherefore it is much due to usage taxation information connected inheritance relief, alternatively than workplace survey data, to estimation the interaction of the alteration successful the Budget connected individuals.

Another situation is that immoderate initial authorities calculations of the fig of estates apt to beryllium affected lone referred to Agricultural Property Relief (APR) and not Business Property Relief (BPR).

APR relates chiefly to the worth of land. BPR tin see a farm's machinery and livestock, which tin besides marque up a important proportionality of the worth of an cultivation estate.

It is existent that some APR and BPR alleviation volition beryllium capped astatine a combined £1m for inheritance taxation purposes, meaning a azygous property volition beryllium capable to assertion nary much than £1m successful these combined reliefs.

Farming groups person claimed that farmers often besides usage BPR truthful immoderate calculation of the interaction of the taxation changes based solely connected APR claims volition not seizure the afloat effect connected farming estates.

• Thousands of farmers protestation against inheritance taxation changes

However, the government has present published figures based connected HMRC inheritance taxation information which incorporated humanities APR and BPR alleviation claims, and should seizure those cultivation estates making usage of some reliefs.

These figures suggest that portion taking BPR into relationship arsenic good arsenic APR does propulsion up the fig and proportionality of estates apt to beryllium affected, it does not fundamentally alteration the picture.

The information shows that successful 2021-22 the fig of estates making combined APR and BPR claims wherever the worth of the property was much than £1.5m was 383, oregon 22% of each claims.

The fig of estates worthy much than £1.5m making APR claims solely was 278, oregon 16% of the total.

The government’s latest figures interruption down the interaction utilizing the threshold of £1.5m, not £1m, explaining to BBC Verify that this was chosen based connected the presumption that an idiosyncratic estate’s modular inheritance taxation reliefs of £500,000 would beryllium added to their caller £1m allowance.

BBC Verify asked the Treasury and HMRC for a breakdown of the figures utilizing £1m arsenic a threshold - which would beryllium accordant with its archetypal calculations showing APR claims lone - but it said it hasn't collated those figures.

The CenTax deliberation vessel has studied the interaction of APR and BPR reliefs.

CenTax’s co-director Arun Advani argues that the government’s estimates of the fig of cultivation estates apt to beryllium affected by the capping of some reliefs astatine £1m combined - up to 520 estates a twelvemonth - seems reasonable.

“The information connected historical claims are a overmuch much reliable usher to the fig of affected estates than surveys of workplace sizes,” helium said.

“While the government's reforms are surely apt to beryllium hard for immoderate farmers, peculiarly fixed the galore different factors weighing down farmer's incomes, numbers claiming tens of thousands volition beryllium affected aren't accordant with the evidence.”

David Sturrock from the autarkic Institute for Fiscal Studies besides said that the Treasury’s figures were “credible” and added that including the interaction of capping BPR “doesn’t radically alteration the representation successful presumption of estates affected”.

The NFU has pointed retired that if 500 estates were affected per twelvemonth that could magnitude to 15,000 implicit 30 years - but this would inactive beryllium immoderate mode abbreviated of the 70,000 figure.

The NFU argues that galore estates included successful the authorities figures are excessively tiny to beryllium considered moving farms.

Its lawsuit is elemental - if you were to exclude these tiny farms, the percent of real, moving farms affected would beryllium overmuch higher.

It has pointed to abstracted APR inheritance taxation alleviation claims information from HMRC, via the Treasury, which breaks down estates by size.

This shows that successful 2021-22, 474 claims (27% of the 1,730 total) were for estates valued betwixt £0 and £250,000, and that 398 (23% of the total) were for estates valued astatine betwixt £250,000 and £500,000.

“Very fewer viable farms are worthy nether £1m,” says the NFU president Tom Bradshaw.

That's a tenable argument.

If estates with a worth beneath £500,000 were excluded from the APR figures, the stock of the full affected each twelvemonth would automatically emergence from the 27% implied by the government’s archetypal calculations.

The NFU’s investigation suggests lone including what it categorises arsenic “working farms” would summation the stock affected from 27% to 49%.

However, the estimated implicit fig of affected estates - astir 500 successful each twelvemonth - would not beryllium affected by that change.

A cardinal question is wherever the effectual fiscal inheritance taxation threshold for estates with cultivation assets kicks in.

Farming groups person suggested the worth of immoderate inherited property with cultivation assets implicit £1m volition beryllium impacted.

This is understandable arsenic this was the threshold fig cited successful the Budget.

However, the authorities has since claimed that the effectual threshold for galore farmers’ estates to wage inheritance taxation could beryllium not £1m, but £3m, due to the fact that of assorted inheritance taxation reliefs disposable to estates.

A higher effectual threshold would person a large interaction connected the proportionality and fig of estates affected.

The overnment’s assertion is based connected the information that the estates of farmers, similar the estates of everyone other taxable to inheritance tax, are eligible for a modular tax-free allowance, known arsenic a nil-rate band, of £325,000.

They are are besides eligible for the residential nil-rate set of £175,000. The second is disposable to radical who are passing connected a main residence to a nonstop descendant, specified arsenic children oregon grandchildren, arsenic portion of their estate. Together these 2 allowances full £500,000.

This is connected apical of the £1m tax-free allowance for cultivation estates.

It’s not conscionable the £1.5m allowance for a azygous idiosyncratic - for anyone joined their spouse has a akin effectual allowance. Adding these unneurotic - and allowing for the quality of farming couples to stock their allowances - does make a imaginable for immoderate farming estates to walk connected £3m wholly escaped of inheritance tax.

However, importantly, this could lone beryllium achieved if each spouse passed connected £1.5m of their full assets astatine decease sequentially, alternatively than successful 1 £3m property upon the decease of the 2nd partner.

The quality of estates to propulsion up the threshold to £3m volition besides beryllium connected idiosyncratic circumstances. Of course, not each husbandman is married, and immoderate mightiness not beryllium passing connected a main residence.

However, it’s morganatic to presume that galore farming estates would beryllium capable to usage these allowances, which are utilized by the remainder of the population.

Finally, it’s worthy noting that a farming property tin beryllium affected by this inheritance taxation change, without the property needfully ending up paying much wealth successful tax, due to the fact that of the request for individuals to walk much clip readying their taxation arrangements than they did before.