Supermarkets back UK farmers in their fight against inheritance tax changes

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Major supermarkets Tesco and Lidl have come to bat for UK farmers, calling on Prime Minister Sir Keir Starmer to halt his legacy tax reforms or else risk the sector’s future.

British farmers have taken to the streets in London in recent months to protest against changes to inheritance tax relief announced in October’s budget, which will end decades of exemption from death duties.

The reforms mean that from April 2026 a 20 per cent levy will be levied on agricultural land above a threshold of between £1.3m and £3mn, depending on whether the landowners are married and own a house.

Tesco chief commercial officer Ashwin Prasad said on Wednesday that the UK’s biggest supermarket “fully understands[s]Concerns raised by “many small farms” that were dependent on agricultural property relief and business property relief.

“We will support the National Farmers Union’s call for a pause in the implementation of the policy, while a full discussion takes place,” he added. “This is not just a debate over individual policies – the UK’s future food security is at stake.”

Lidl said it was concerned that recent changes to the IHT regime would affect the confidence of farmers and growers and hold back the investment needed to build a resilient, productive and sustainable British food system.

Meanwhile the Co-op Dairy Group, a group of milk suppliers, said in a letter to members that it had “contacted the relevant government department directly to let us know we hope they will look again at the impact of this . . . change” and said it was halting the implementation of the policy. supported the call.

Supermarkets have come under fire from farmers this month, with tractors parked at several major retailers across the country to raise awareness of the impact of the tax changes. On 16 January, supermarket Morrisons was granted a High Court injunction to stop further protests.

Ahead of October’s budget, farm campaign groups criticized supermarkets for squeezing their margins with lower food prices and undercutting them by not supporting domestic produce.

Earlier on Wednesday, the Office for Budget Responsibility released a brief cost of the IHT policy, assuming it would raise an extra £500mn annually for the Treasury between 2027 and 2029, in line with the government’s projections.

But the fiscal watchdog noted that receipts are likely to stop after seven years as farmers increasingly gift their property to children and change their tax planning strategies.

The OBR also suggested that “it will be more difficult for some older people to quickly reorganize their affairs” in terms of succession planning to adjust to the new arrangements.

Victoria Atkins, Conservative shadow environment secretary, said the government had “decided to destroy British family farming in order to make little return. The OBR is clear that it will be almost impossible for older farmers to quickly restructure their affairs in response to this retaliatory tax.”

Farmers say the sector was grappling with climate change pressures, real-term cuts in subsidies, high inflation, wafer-thin margins and the prospect of increased competition as the UK’s post-Brexit trade deals hit before Chancellor Rachel Reeves announced the IHT changes. .

The exemption was introduced in the 1980s to allow farms to remain in the same family after the owner’s death, a trend many have warned will become more difficult. However, this helped drive up land prices as wealthy individuals purchased farmland as a form of legal tax avoidance.

On top of normal inheritance allowances, farmers are eligible for £1mn relief on their estates, and their spouses, before they start paying IHT on their land.

Given that couples already enjoy a threshold of £1mn in their assets that means two spouses will enjoy a threshold closer to £3mn, officials noted.

A government spokesman said: “Our reforms to agricultural and business property relief will mean estates will pay a lower effective inheritance tax rate of 20% instead of the standard 40%, and payments can be spread over 10 years, interest free.

“This is a fair and balanced approach, which fixes the public services we all rely on, which will affect around 500 estates next year.”