Why the tractor tax will bankrupt families like mine

Beyond the confusion over how many farms will be impacted by the inheritance tax changes, the government has overlooked the wider impact on our nation’s food security, writes farmer Rachel Hallos

As I look out over our farmyard to the valley – which looks particularly Christmassy with a robin flitting around our hardy cattle, grazing on the last of the frost-tipped grass – all I can think about is the future of my family. And the futures of so many families like mine, which have been thrown into uncertainty since October.

My husband and I took over the farm tenancy 20 years ago, starting with a dairy farm and slowly building it into a climate-friendly beef operation in the South Pennines. It’s been a journey of hard work and dedication, and there were times when I honestly didn’t know if we’d make it. It was only through relentless effort – blood, sweat and tears – that we got to where we are today.

Now, our children, who grew up with the farm as their playground, are taking on more responsibility. But everything we’ve planned for them now feels upended.

The changes announced in Rachel Reeves’ Budget mean that farms will be required to pay 20 per cent inheritance tax on business property relief (BPR) and agricultural property relief (APR) over £1m. That might sound like a lot of money, but even for a tenant like me, the machinery, cows and various other things needed to run our business will exceed the £1m threshold on BPR alone.

Like many farm businesses across the country, we make very little income. Most of our yearly earnings cover the cost of paying our tenancy rent and compensating our children for their work on the farm. We barely have anything left over. And this isn’t a unique situation: on average, farms make less than 1 per cent income a year – and that’s often shared across the partners in the business.

So, when my husband and I die, I fear for how our children will manage the tax bill – which could easily run into the hundreds of thousands of pounds. There’s no way for them to cover that tax, the cost of rent and their own living expenses, without selling off machinery, cattle or other parts of the business. This could mean the collapse of everything we’ve worked for over the past two decades. As a mother, a farmer and caretaker of the countryside, this breaks my heart.

The government claims that the reform will close a tax loophole and that, thanks to spousal exemptions and nil-rate bands, two people could pass on up to £3m without paying tax. While this might be theoretically possible, the reality for many is far from it – for one, it assumes that farm owners are married, and it completely ignores widows, divorcees, and single people.

Even if you’re optimistic and, say, a farmer has a £2m threshold before the tax kicks in, for many medium-sized farms, spreading the inheritance tax bill over ten years would wipe out most – if not all – of their returns. For larger farms, it would cut returns in half. At the £1m threshold, the tax bill would exceed the average returns of a medium-sized farm and take up the vast majority of a larger farm’s income. This isn’t about closing a “loophole” – this is a death knell for many family-run farms.

For a farm like mine, it means we can no longer focus on growing our business and producing more food for the nation. Instead, we’ll be forced to spend money on expensive tax advice, just to understand how we can safeguard our children’s future and protect what we’ve built.

Perhaps the most troubling part of this new tax reform is the government’s complete misunderstanding of how many farms will be affected. According to an impact analysis by the National Farmers’ Union (NFU), 75 per cent of commercial family farms are at risk due to these changes. This isn’t just a number on a page – it represents families like mine, working hard to maintain and grow their farms, but who now face an uncertain future.

Without a reversal of this tax policy, I’m genuinely worried that I won’t be able to give my children the future they’ve worked towards – the future they’ve imagined since they were little, playing with toy tractors in the yard. I’m concerned that we won’t be able to hire local workers to help us plant biodiverse hedgerows or invest in the infrastructure we need to produce high-welfare, climate-friendly food. I’m scared that we won’t be able to feed the nation, as we’ve always done.

Rather than pushing reforms that threaten the survival of family farms like mine, the government should focus on creating a sustainable, profitable future for farming. It’s time for the government to protect the farms that nourish us all, before it’s too late.

Rachel Hallos is an upland tenanted farmer from the South Pennines who works in partnership with her husband and children. She is also vice president of the NFU