Tractor Tax Could Hit Farmers Five Times More Than Government Claims, Expert Warns
Rachel Reeves’ proposed changes to agricultural subsidies through inheritance tax—dubbed the “tractor tax”—could affect five times more farmers than the government estimates, according to the Central Association of Agricultural Valuers (CAAV).
The Ministry of Finance said the changes will affect about 500 farmers each year. However, Jeremy Moody, CAAV secretary and advisor, says this figure is incorrect due to a misunderstanding of the difficulties of the agricultural industry. He asserts that these new measures will affect about 2,500 farmers per year.
Moody asserts that the Department of Finance’s analysis ignored farmers who only want Business Property Relief (BPR) and not Agricultural Property Relief (APR). This includes people who own land but not a farm house, those in farming partnerships, tenant farmers who do not own land or buildings, and farmers who own shares in family companies.
“They’re wrong because they’re working on an incomplete picture,” Moody said. “What’s wrong is, they didn’t know what to ask and HMRC couldn’t answer them even if they had.”
He estimates that in a generation, about 75,000 farms will be affected by the changes.
Currently, farmers can claim up to 100% inheritance tax relief on their land and buildings through APR and equipment and livestock through BPR. From April 2026, only the first £1 million of their land and business assets will qualify for 100% relief under the new rules. Any amount above this limit will be subject to inheritance tax at an effective rate of 20%—half the standard rate of 40%.
The government says farmers can have a tax-free income of £1.5 million per person, allowing a married couple to have up to £3 million of assets tax-free. This figure includes personal estate tax allowances. However, Moody disputes this, saying that these restrictions are personal and should not be applied to business assets.
“That seems really unfair to me,” he commented. “If you throw all that into the farm, what you’re doing is saying that all your results will be taxed at 40%.
The BBC Verify fact-checking service has supported the Treasury’s estimates, and the government has published this analysis. Sir Keir Starmer commented, “You can all look at what that means in terms of impact. I think the BBC has already done it.”
A government spokesman said: “Our commitment to our farmers is strong – we have committed £5 billion to the farming budget over two years, including more money than ever before for sustainable food production… We have been clear since the change was announced that they are around 500. Applications for Agricultural and Business Property Relief will be affected every year… It is not possible for us to accurately calculate the inheritance tax liability in the calculation of the total value of the farm as there are different circumstances affecting each farm.”
Moody’s criticizes government and BBC analysis for not fully understanding the farming industry, leading to an underestimation of the impact of policy. He emphasizes that many farmers, such as tenant farmers, may not benefit from certain tax incentives and that the changes could seriously affect their financial situation.
