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Supermarkets Tesco and Lidl have hit out at UK farmers, calling on Prime Minister Sir Keir Starmer to halt inheritance tax reforms or risk the future of the sector.
British farmers have taken to the streets in London in recent months to protest changes to inheritance tax announced in October's budget, which will end decades of exemptions from death duties.
The reforms mean that landowners will from April 2026 be subject to a 20 per cent tax on agricultural land above a threshold of between £1.3mn and £3mn, depending on whether they are married and own a home.
Ashwin Prasad, Tesco's chief commercial officer, said on Wednesday that the UK's biggest retailer was “absolutely aware” of the concerns raised by “many small farms” that relied on agricultural property relief and business property relief.
“We will support calls by the National Farmers' Union to suspend the implementation of the policy, while full consultation takes place,” he added. “This is not just a debate about personal policies – the UK's future food security is at stake.”
Lidl said it was “concerned that recent changes to the IHT regime will affect farmer and grower confidence and hold back the investment needed to build Britain's sustainable, productive and sustainable food system”.
Meanwhile the Co-op Dairy Group, a group of milk suppliers, told members in a letter that it had “directly contacted the relevant government departments to communicate our hope that they will review the impact of the . . . change” and said it supported calls to suspend the implementation of the policy.
Supermarkets themselves have drawn fire from farmers, with tractors this month parked at a number of supermarkets across the country to publicize the impact of the tax changes. On 16 January, supermarket Morrisons was granted a High Court injunction to prevent further protests.
Ahead of the October Budget, farm campaign groups have slammed supermarkets for squeezing their margins with low food prices and undermining them for not supporting local produce.
Earlier Wednesday, the Office of Budget Responsibility released a brief price of the IHT policy, which is estimated to raise an extra £500mn for the Treasury annually between 2027 and 2029, in line with government forecasts.
But the fiscal watchdog noted that the receipts could end after seven years as farmers increased their estate gifts to children and adjusted their tax planning plans.
The OBR also suggested that “it will be more difficult for some older people to adjust their affairs quickly” in terms of estate planning to adapt to the new measures.
Victoria Atkins, Conservative Shadow Environment Secretary, said the government had “chosen to destroy British family farming with little compensation. The OBR is clear that it will be difficult for older farmers to restructure their businesses quickly in response to this tax.
Farmers said the sector was struggling with the pressures of climate change, real-time cuts in funding, high inflation, wafer-thin margins and the prospect of increased competition as the UK hammers out post-Brexit trade deals before Chancellor Rachel Reeves announced IHT changes. .
The exemption was introduced in the 1980s to allow farms to remain in the same family after the death of the owner, a practice that many warned would be too difficult. However, it has helped drive up land prices as wealthy people buy farmland as a way to avoid official taxes.
Farmers looking to pass on their inheritance, and their spouses, are each eligible for £1mn of relief before they start paying IHT on their land, on top of normal inheritance allowances.
Given that couples already enjoy an average of £1mn in their estates it means that two partners could enjoy a threshold closer to £3mn, officials noted.
A government spokesman said: “Our reform of agricultural and business property benefits will mean that estates will pay a reduced inheritance tax 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 will improve the public services we all rely on, affecting around 500 estates next year.”