Why is a farm so valuable if farming is not profitable?
Posted by Kitchen_Narwhal_295@reddit | AskUK | View on Reddit | 376 comments
In the news about changing the inheritance tax exemptions for farmland, it is generally recognised that many farmers have big assets on paper but not much money coming in to cover tax bills. Why is a farm so valuable if it doesn't bring in money? Does it imply there is another use for the land that would bring a much bigger return? If an asset of that value brings in such a small yield, why aren't loads of people selling up and thereby reducing the price? Is it just attachment to the place and way of life or is there an economic explanation?
trcocam29@reddit
This isn't addressing OPs question, but the idea of revoking farms' IHT waiver is ridiculous. This thread is full of people arguing that they should pay because the land is valuable and they themselves have to pay IHT. It is all very short-sighted. The fact that IHT has now been introduced will force some land-owning farmers to sell up, whilst others will potentially consider it a better decision. I think the result is either that farming is largely driven out of the UK (which could be catastrophic in the long term) or that you will see big corporations buying up the land for farming.
I come from a line of land-owning arable farmers (though my direct family filtered out 2 generations ago). There was a time where they made excellent profits selling soft fruits (I believe around and after the 1950s to circa 1990s). However, these days I understand it to be a struggle. Profits are almost nonexistent after paying their (rather meagre) salaries: the farm no longer develops, just scrapes by on maintenance. Whilst the farm is technically owned by one couple, it is the home and workplace to their sons and their families. Their land is likely worth in the region of £5mil, and they simply do not have the cash in hand to pay IHT. I don't think it likely they will fully sell up when the time comes, but they will undoubtedly be forced to slowly sell off land. Being land rich, where you require that land to pay your way and thus it is far from being liquid, does not make you rich.
bishibashi@reddit
Land is valuable because it’s a limited commodity. Part of the increase in value over recent years is because whacking all of your money into farmland allows you to pass it on without paying any tax, so people like James Dyson buy 1000s of acres, not because they want to be farmers, because they want to avoid tax. The loophole needs closing, I have no view on whether the proposed legislation is a good way of doing it.
MrTubek@reddit
It's just going to make poor farmers sell out on their lands as they won't be able to afford it and the loaded fat pigs to buy out with no problem at all. So, as always, big F to common ppl and all the support for rich
philpope1977@reddit
poor farmers don't own any land. Average farmers own land that will be under the threshold. If land values fall a lot of rich farmers will be under the threshold too. It is the very rich farmers who will have to pay some tax. boo hoo.
farmerbalmer93@reddit
How much do you think a farm is worth at the moment? Say a 200 acre farm with a house and facilities to say milk one hundred cows. That's basically the size it needs to be to support a family any less and you'll probably never make a profit.
philpope1977@reddit
the size of the average UK farm is about 50 acres. 200 acres is probably in the top 20% of farms. Dairy farming is one of the slimmest margins. 200 acre dairy farm is probably worth less than £3 million so no inheritance tax payable if done right.
farmerbalmer93@reddit
Lol you really believe them when they say the average farm size is 50 acres.... You can't farm on 50 acres you can not make a living off 50 acres. This comment alone shows how little the public seem to understand around farming. 50 acres is a hobby farm not a farm. Actual average is 82 hectares that equates to 202 acres. People with 20 sheep 3 cows 4 horses 2 pigs and a goat aren't farming they're passing time.
philpope1977@reddit
Farming evidence - key statistics (accessible version) - GOV.UK
half of farms are below 50 acres. That's why I say the average farm is 50 acres. Because of some very large farms the average farm size is 200 acres. It's the difference between the median and the mean.
So you don't think much of half the farming community and want them to be swallowed up by larger commercial farms.
farmerbalmer93@reddit
Here's the thing 50A isn't enough to call your self a farmer. technically they are correct you can have a 10m square plot of land with potatoes growing in it technically your a farmer. You can't have a home steader be counted as a family farm. The fact that you think 200 acres is a large farm... 100 years ago 200 would be a large farm but would also employ half a town to run it. I am friends with plenty of people with a small amount of livestock and have 10 20 or 50 acres of land, I sell them bails. The one thing they all have in common is that the "farm" is a side gig, they have a very well paid job or have a successful business. Not a single one of them would call themselves farmers. You need at the very least 100 acres to sustain a family of 4 ideally you want 200 then at least you can make a profit and not get a part time job. People don't expect a NHS doctor to get a part time job why should a farmer? Because as soon as you push above the amount of land you'll need to make money your children will have to sell it to pay the tax and if you stay below it your going to need another job to make ends meet.
The governments view on what a small family farm is, is distorted beyond belief.
philpope1977@reddit
so 200 acre farms are worth £2M-£3M and if owned by a married couple (family) will pay no tax. Farms bigger than this - wealthy families and large estates that rent out land to tenant farmers - will be hit by the tax.
farmerbalmer93@reddit
200 acres say needs one man to farm depending on type of farm 400 needs two people 600 three. Say that 200 acre farm makes 30k profit a year (likely a lot less) a 400 acre farm could double that profit but you're needing to pay another person to run it. So with the increase in farm size doesn't instantly mean wealth it just means you pay bigger bills but get bigger profit the end of the day it all comes down to not very much money.
Why not tax land owners on money made on all assets? All this will do is make land disappear to large corporations and businesses that do not pay tax in this country. You can't add a tax like this and expect farmers to carry on making food below production costs. Increase in land size and cost of running it is basically 1to1. It's a tax on the middle man not a tax on the rich, large companys still won't be paying income tax on land, they will just be buying it.
philpope1977@reddit
taxing profits rather than assets means that businesses buy extra things to reduce their tax liability. Like buying extra vehicles to bring annual profits below the personal income tax allowance. This makes profit and return on capital look much worse than they really are.
Nice-Wolverine-3298@reddit
Sayv£5k per acre, that puts the land alone at £1m. Throw in the house, livestock and machinery on top, and you're starting to get closer to £2m so on that basis, most small farms will be hit. Remember, this is a government that continually refuses to release the impact analysis for its policies, as the recent WFA showed some 100k pensioners would be immediately placed into poverty, so I'm expecting the farming tax analysis to be similarly horrifying
worotan@reddit
This is a government that is trying to close the loopholes that the super rich use to escape paying tax, and made-up appeals to it hurting ordinary people really aren’t realistic.
Just because paid journalists shout outrage, doesn’t mean the rest of us are feeling it.
asdf0897awyeo89fq23f@reddit
But it's still enough for them to choose it over contract farming?
WelshEngineer@reddit
The issue is when they take into account the value of machinery and animals. The other issue is that the figures have been misrepresented, stallholders and hobby farmers who have 1 or 2 acres they keep a few sheep on have been classed as farmers. But to be viable as a farming business a farm needs a substantial amount of land. This means that actual farmers are affected at a much higher rate.
They also know that the government has a habit of not increasing the thresholds so even if it was a small proportion now, values will increase over the next 10 years and more will be caught put.
baildodger@reddit
If your farm is successful enough that you can afford to own all your equipment and land to the value of more than £3 million, why SHOULDN’T you pay inheritance tax on it? It’s 20% (half the rate the rest of us pay!) of everything over the limit. It’s not like it’s going to be completely crippling people, some of them might have to sell <10% of their stuff to pay the bill.
Thugmatiks@reddit
Tax free, up to 3 million (for parents to hand to their children) forgive me if my heart doesn’t bleed.
Nice-Wolverine-3298@reddit
The spite in so.e comments astounds me. We already import 46% of our food (2020 statistic), and that will get worse under this policy. As the recent war in Ukraine showed, the fact is that external suppliers are precarious at best. Do you really think food will be cheaper when we have fewer UK based farms? The loophole on buying land to avoid tax (a la Dyson) needs to be looked at, but this is an ill thought out policy from what is shaping up to be an awful budget.
worotan@reddit
This is them looking at that loophole and closing it.
So why the outrage porn distraction attempt?
Nice-Wolverine-3298@reddit
Because it's an ill thought through solution like most of the Treasury ones. As we can see it's a significant amount of disruption for a pitiful gain. 250m in its initial year, rising to maybe 500m in 2029. That fund the NHS for all of 25 hours. So please tell me why you think the messing around with food security is worth that.
Nice-Wolverine-3298@reddit
The spite in so.e comments astounds me. We already import 46% of our food (2020 statistic), and that will get worse under this policy. As the recent war in Ukraine showed, the fact is that external suppliers are precarious at best. Do you really think food will be cheaper when we have fewer UK based farms? The loophole on buying land to avoid tax (a la Dyson) needs to be looked at, but this is an ill thought out policy from what is shaping up to be an awful budget.
TheMrCeeJ@reddit
If only they had exemptions in place that can get you up to £3M tax free. That would have to be a pretty expensive poor farm to pay any tax at all.
mad-un@reddit
The fact that Clarkson is leading this band of farmers says a lot! He apparently bought the farm to dodge this loophole and it's backfired
notThaTblondie@reddit
Clarkson has done more for farmers, spoken out for them, brought the reality of farming to the view of the general public more than anyone else. He is absolutely beloved by the farming community and rightly so. They all know he is part of the problem on this one, he knows it too but he's out supporting farmers and speaking out for them.
worotan@reddit
He’s speaking out for the rich, whose practices hurt ordinary farmers. So he isn’t supporting farmers and speaking for hem here, your logic is totally bent out of shape.
Sensitive-Fishing-64@reddit
if you dodge a loophole you're back to where you started
MrTubek@reddit
So what is the point in introducing such change if half of farm lands in the uk are 50 acres, which totals in less than £1M. Thank you for your clarification
Pedwarpimp@reddit
Because it will specifically target the richest people with the most land, not the small family farms.
chostius@reddit
That’s a load of wank. £3m is the maximum double allowance, assuming direct ownership and maximum inter vivos IHT planning, none of which is clear to estate planners yet. Even then that’s only 3-400 acres of pure land not counting machinery or live/deadstock or future yield, which might be sufficient for livestock farmers with middling value land but devastating for arable farmers. You’re talking out of your arse.
Pedwarpimp@reddit
https://www.bbc.co.uk/news/articles/c8rlk0d2vk2o
chostius@reddit
If you were trying to prove some point, you failed.
Pedwarpimp@reddit
It illustrates that not that many farmers will actually be affected because it targets the bigger farms based on the thresholds.
In addition to that, if you're genuinely a family farm you can pass the farm down 7 years before you die and avoid the IHT all together.
What this does is make it less attractive to people like James Dyson as a vehicle to avoid IHT. He has bought 35,000 acres, taking it out of the hands of family farms while driving up the price of land.
https://www.spectator.co.uk/article/james-dyson-isnt-helping-farmers/
TheMrCeeJ@reddit
Yeah. Being married, living on your farm and passing it on to your kids sounds like a really complicated amount of planning to do.
£3M is still £3M, and the idea that that somehow constitutes a poor farmer is just wrong. The average worker could save 100% of their earnings for 100 years and not make that, so why should this tax loophole be left open for rich people to exploit?
cuccir@reddit
Or they transfer the land when they're 60 and take out insurance that covers the inheritance tax if they die in the next 7 years.
wayneio@reddit
This is totally it. The problem is, we need to find a way to stop the inheritance tax loophole for rich people while not affecting real farmers and I have no clue how you'd make legislation to do that
Fantastic_Picture384@reddit
I think that's the best answer I have seen.
tmr89@reddit
This Dyson guy sounds like a bit of a prick
Gullible_Macaron_949@reddit
Yeah he sucks
lessthandave89@reddit
and blows
heliskinki@reddit
Badly
Double-Hard_Bastard@reddit
He sucks.
badpebble@reddit
We need to watch Dyson, if we are careful he might just try to pick up his farmland and move it to Singapore.
Tasty-Explanation503@reddit
He's a total c%&t.
National_Actuary_666@reddit
He is.
parkerontour@reddit
For the dummies in here.. ahem.. by pass it on do you mean to their children? So they are avoiding the death tax?
Thugmatiks@reddit
It’s unfortunate to call people dummies, then be so catastrophically wrong.
parkerontour@reddit
It was a joke, I was calling myself a dummy. But clearly it’s gone over everyone’s head.
Thugmatiks@reddit
Ah, ok. My bad.
parkerontour@reddit
No problem dude, have a great day!
Double-Hard_Bastard@reddit
By "gone over people's head" I guess you actually mean "people didn't get my poorly-worded and not at all funny comment".
tomcat_murr@reddit
Inheritance tax.
Nobody gets taxed for dying. Different people entirely get taxed on unearned money they inherit.
Damascinos@reddit
You don’t get taxed for dying because you’re dead. But your children get taxed for you dying.
So yes, there is a death tax.
royals796@reddit
No, the children get taxed for inheriting land with a value of over £4m. That’s what triggers the tax, not someone’s death.
parkerontour@reddit
Isn’t it a ridiculously high amount too? Over 50%?
Creepy_Radio_3084@reddit
Isn't what a ridiculous amount?
IHT for Joe Average is 40% of estate over tax-free threshold, but the IHT for farms will be 20%.
You'll have £325k basic allowance, plus £175k for primary residence (£500k total). If Joe Average dies and his estate is below the threshold, he can pass his estate to his wife, Jane Average, with no IHT. When Jane dies, her children will only pay IHT on estate over her allowance (again £500k) plus the £500k transferred from Joe (total (£1M). If the total estate is £1.2M, then the IHT is 40% of £200k, or £80k. This is taken from the estate before it is disbursed, so no, the children don't pay it exactly, the amount they inherit is reduced from £200k to £120k.
NewtonsOyster@reddit
IHT is not taken from the estate before it is disbursed. IHT must be paid before probate is granted. Probate is required to release funds, sell property, etc. IHT on property can be paid over 10 years, which helps. Not so on everything else. Some institutions/banks may support the direct payment scheme and pay direct to HMRC. It is possible to be in the position of having a large inheritance that you can not get released as you can not afford to pay the IHT in advance. Enter bridging loans, remortgaging, etc. It's a shocking system.
trysca@reddit
No it will be 20% for farms while anyone else pays 40% currently they pay 0%
Damascinos@reddit
I stand corrected
GlasgowGunner@reddit
Your estate gets taxed if you’re wealthy enough to be over the threshold.
Damascinos@reddit
Of course, I’ve been corrected
Toon_1892@reddit
Nursing home has entered the chat.
tomcat_murr@reddit
Not a tax. I think it should be - and an inheritance tax would be an excellent way of doing it - but as it stands it isn't.
MerryWalrus@reddit
Technically the tax is on the estate not the recipient.
It would make a lot more sense to have it the other way around.
tomcat_murr@reddit
I actually thought about this as soon as I wrote the reply! Yes, I agree.
But I guess I'd argue that once you're in the position to have an estate that needs taxing, it's pretty much by definition nothing to do with you any more.
MerryWalrus@reddit
But it moves the debate away from "taxing the dead" to taxing the windfall gains of the living. Which is a lot less emotionally loaded.
FlippingGerman@reddit
Limited seems only half of it - people also have to want it. Why do they want it if it doesn't earn much money? You do answer that, but are the rich people buying enough land to substantially affect the price?
blacksmithMael@reddit
It isn’t. The only people who’ll be paying this tax are the small farmers who can’t afford the advice to get around it.
Hugh_Jorgan2474@reddit
So someone with a £3.5 farm is a small farmer? This loophole closing will bring the value of farm land down as rich tax evaders will no longer be buying it, thus increasing the size of farms that are exempt
blacksmithMael@reddit
It is 1 million for the agricultural land, isn’t it? Therefore 2 million worth for a couple, call it around 200 acres at typical prices?
That’s a pretty small farm. I imagine it sounds enormous to people in cities who’ve no experience farming, but it really isn’t.
mikolv2@reddit
It's £1m for agricultural land, £325k of tax-free inheritance on top of that, and another £175k if the inheritance includes residential property like a farmhouse so a couple gets to pass down £3m before any taxes.
blacksmithMael@reddit
200 acres, the farmhouse, a tractor, telehandler and attachments then. Still feels like a small farmer to me.
Thugmatiks@reddit
3 million in assets is roughly 3 million more than vast swathes of the country have. The working classes are absolutely dying from 14 years of austerity and farmers are complaining about tax AFTER 3 million.
Do you see the irony in that at all?
Thugmatiks@reddit
3 million for a couple
AlpsSad1364@reddit
Anything less than about 200 acres isn't viable. Add in the farmhouse, some barns and equipment and you're very quickly at £3m
Family at the end of my road farm about 400 acres with just the farmer and one of his sons with occasional help from other kids at busy times. His wife works part time in a pub and they do B&B in the summer. They made £15k profit last year.
Land round here is expensive because londoners like to buy a couple of acres to stop people building near their holiday home (something that can't happen anyway) or keep horses on it. Average is about £13k per acre so their land alone is ostensibly worth over £5m. I have in the past suggested that they would get a better return from selling it and buying shares but the only people who could buy their land (planning stops it being used for development) are their neighbours and they neither want it all nor could afford it. So the value is entirely nominal.
Angrylettuce@reddit
400 acres is a pretty big farm, regardless of what they farm.
~ source - I am a farmer and vet
ddven15@reddit
If nobody wants to buy the land at over £5m then that's not its value
blacksmithMael@reddit
I suspect this may be a lesson of 'act in haste, repent at leisure' for our current government. It may not be the only such lesson they have arranged for themselves in their short time in office so far.
dapperdan8@reddit
This is where a lot of the anger comes from, most people really have no idea how tight the margins are in even a relatively large arable farm let alone a hill sheep farm. Doesn’t help when 50 acre horsey small holdings get classified as a “farm” so the treasury can claim most “farmers” won’t be affected.
teslas_codpiece@reddit
How is that the case? Are small farmers sat on over £1m of land?
This is the central contention right? The idea that they both are AND they're cash poor.
Is the treasury estimate that it'll be 500 a year wrong?
notThaTblondie@reddit
1 million doesn't buy a very big farm. There's 200 acres near me up for about 2.2mil 200 acres might sound a lot of land but in farming terms, it's tiny.
Thugmatiks@reddit
That’s tax exempt. And it’s inheritance, not buying.
blacksmithMael@reddit
I would be very surprised if the treasury estimate is correct.
Asset rich and cash poor fits. Don’t forget that a bad harvest hurts: you can easily lose money, even with subsidies. And a million doesn’t go that far, a hundred acres or so. That really isn’t a big farm.
Thugmatiks@reddit
Treasury estimate wrong. Dave the Farmer, way more accurate.
Weird1Intrepid@reddit
I've no idea of general farm property values but I can anecdotally say that a tiny farm I worked in Fife that didn't even have enough sheep to be profitable, with basically completely dilapidated buildings missing roofs, electricity, water etc, was worth a bit less than 5 million a couple years ago.
Thugmatiks@reddit
How sad for them that they only have 5 million in assets. Sounds like a terribly looked after place as well.
Duanedrop@reddit
It is only worth that because of the tax loophole. It is worth what someone will pay. If it is worth less because ,god forbid, you have to use the asset profitably, maybe some sense will come to the market. You cannot change how markets work without some losers. The system needed updating and this is a start. Dukes and gentry have passed great swathes of this country on through the generations and the country receives little benefit. We need to make better use of the land and it should be more divided and available. Ppl are stuck in the past, this should push farmers into being more profitable and adopting modern practises, like vertical farming just to name one.
teslas_codpiece@reddit
For sure, there is never a perfect way to update a system. Another big factor is that when you're correcting a system through measures like taxation there are a load of measures which sound good in theory but which would cost an arm and a leg to implement and police, plus occasionally bring unintended consequences of their own.
Here I don't know enough but it feels like as well as introducing IHT that could slightly depress the cost of the land and put off the Dysons of this world a little, but you maybe need another good measure to stop land being dormant and to punish landlords who don't farm the land themselves without impacting their tenants. I assume those measures have other downsides if introduced, or maybe they simply won't give the known & instant payoff as the IHT plan.
Thugmatiks@reddit
Just factually completely wrong.
jonpenryn@reddit
Seemingly they cant make money out of a £2 million asset, but they feel they have a right to carry on.
Recent_Strawberry456@reddit
I recommend 'Harry's Farm' on the well known you video web site.
jonpenryn@reddit
Simple sell the farm to Clarkson and his ilk. Stop complaining when asked to pay some tax like everyone else has to. If you cant hack it stop doing it.
NarwhalsAreSick@reddit
Just as well we don't need food then.
jonpenryn@reddit
Someone will make it work, sell the farm and retire.
BuBBles_the_pyro@reddit
Years and years of very rich people buying land to avoid tax massively inflated the cost of land. Farmers might own tractors and what not, but most rent the land. Look at who the biggest farm land owners are and most of them start with Duke.
liquidio@reddit
Almost all the ‘Dukes’ do not own the land directly but are beneficiaries of trusts that own the land.
Such trusts already have their own system to pay a periodic tax from the trust which over a lifetime approximates inheritance tax (roughly 6% every 10 years), the difference being they do not need to pay it in one go without liquid funds.
https://www.gov.uk/guidance/trusts-and-inheritance-tax
https://nichols.co.uk/news/the-10-year-charge-on-trusts/
So most of these huge landowners actually do pay a version of inheritance tax and have done for, IIRC, almost 20 years now.
Just posting this because most people seem to have no clue about this, and it’s very important context for you statement - it is not the ‘Dukes’ buying up land to avoid IHT that has been causing the problem in recent decades.
gyroda@reddit
By all in one go, do you mean over 10 years?
CallMeKik@reddit
Wait is the new tax thing paid over 10 years?! I’ve not been paying attention. Wow that’s much more lenient than I had heard
BarNo3385@reddit
Yes there does seem to be a mechanism to pay inheritance tax over 10 years.
It's still somewhat irrelevant though, the IHT on a modest but sustainable family farm could easily be 30-40 years worth of profit.
Effectively every generation would spend their whole life saving every penny they make in profit to pay the IHT bill to pass the farm on to the next generation.
One example I saw was that a top yielding farm with lower end fixed costs might generate around £145 profit a year.
That acre is valued at c. £10,000, for a yield of 1.45%. Put the other way, if that acre incurs a 20% IHT charge on death, (£2,000), you would need c. 14 years of profit to pay for it.
And that's assuming the best case scenario of high yields, low fixed costs and no "bad" years. Add all that in and a more typical scenario might be 28-30 years of profits to pay the IHT charge.
Wd91@reddit
I can't help but wonder if that 1.45% figure you've used is already accounting for all this.
BarNo3385@reddit
No, the £145 per acre example was specifically a top end estimate. Averages are around half that.
Of course farming is variable year on year, and you will get some exceptional years - especially where good conditions in the UK coincide with bad conditions elsewhere so prices for farm commodities shoot up.
If you had a highly profitable farm in an exceptional year maybe that 145 can reach 250 or more. But by the same token, a farm with higher fixed costs in a bad year won't even reach the 145 figure.
Wd91@reddit
Not that i don't believe you, but its helpful in times like this if you can provide sources.
If farmland isn't even returning a 1% profit on its own consistently then it seems like that might be the real elephant in the room, in and amongst all the talk about IHT. If thats truly the case then farming isn't a viable business in the first place, and this IHT talk is just by-the-by. In which case, we need to have a discussion about how (or even if) we address this in other ways, rather than giving the ultra-wealthy tax breaks and hoping farmers can make some use of it too.
fussyfella@reddit
There is already another elephant in the room: a large part of the farmers' income comes from the taxpayer already. Closely related is that they have far more generous rules on how they write off assets than most businesses, which is one of the reasons their headline profits are often low. Then look at the property many live in and realise most improvements to it are written off in costs to the farm too. Ditto with the vehicles they drive.
Then there is how they can drive a coach and horses through planning law much of the time: a farmer near me (one of the vocal ones in the current whinging) who owns a lot of land, just had a brand new enormous house built in a stunning location. If I had brought that plot of land, there is zero chance I would have got planning permission for it, but because of various farm exemptions it went through on the nod, and his old (not at all shabby either) house is now a very lucrative AirBnB.
No farming is not an easy life, but they already get way more tax breaks (and actual payments from taxpayers), than any other class of business.
Acerhand@reddit
It’s understandable. Farming is not profitable in a strictly open market. Land and food are so, so, so abundant globally especially with modern technology and farming innovations, that without tax subsidies and such, nobody would farm food like crops because they’d not make any money. Then we have w major problem with national food security. Its completely understandable that farmers get a lot of “benefits” in this form, especially considering modern day with the children of wanting farmers rarely wanting to continue it. They simply have to sweeten the deal.
Would you do it?
That said these issues are little to do with that and the yields, and much more to do with land value. The land values are higher than they should be and that is clearly a result of demand - but not demand to farm on the land.
fussyfella@reddit
There are many businesses I would not do and none of the others get even close to the same subsidies farming does, and most of them have much higher risk. Why for instance is inheritance tax on dental practices not given special treatment, equipment purchase the same tax breaks, and the subsidy on state ait not at the same level as for farming? Dentistry in the UK is in a way bigger crisis than farming.
This is special pleading, not more no less.
Acerhand@reddit
I think its just a benefit of living in modern society to view it that way. We have all lived in a world of food abundance. There is always a massive glut of food available. Its the most basic aspect of civilisation and such, that its normal to take it for granted.
However that only exists due to people producing the food. Now of course we can decide to import 100% of all our food, and be totally and utterly dependent on that… which is something basically no country is willing to do for extremely obvious reasons.
So producing food domestically becomes a necessity… why on earth would anyone be a farmer when, if the free market was let to do exactly what it does, would result in 24/7/365 work to loose money and go into debt? Nobody would. Selling food crops is almost like selling sand near beach… worthless due to supply.
So the only solution is to make it a better deal for farmers through subsidies and such.
The question of why not give subsidies to dentists, or all the other professionals is simple: none of them get to exist without food. It is the basis for all civilisation.
fussyfella@reddit
As I said "special pleading".
Farming is not some romantic self sufficiency regime, it is a highly mechanised and capital intensive industry. The key word is "industry", just as dentists need to eat, the farms are tied into a supply chain involving petrochemicals, and high end mechanical devices. Saying they are so different from other industries is nonsense. Plus I bet a farmer would hate being deprived of access to modern dentistry when they got a gum abscess, or needed an impacted wisdom tooth removed.
New Zealand took away subsidies and provided an exit programme for farmers to leave in the 1980s, now they have some of the most efficient farms in the world, and export food all over the world but an island far less geographically convenient than the UK. We could do that too if we wanted. Let the industry compete properly, and then pay others to run what are effectively parks because we like the views. The land mix in the UK is not that different from New Zealand either, and a regime like theirs could well increase the local food supply for the UK.
Acerhand@reddit
Farming is not a high yield business and never has been. Throughout hustle it was always done by slaves or people bound to the land with no other options. Land is abundant in the world. A lot of government’s subsidies farming to it wouldn’t be profitable and nobody would do it. Thats just how abundant food is.
However we need people to grow food, which is why subsidies exist etc.
The problems with the tax is a lot more to do with the land value which is evaluated in some kind of fucked up way which is put of line with yields from farming. This is usually a result of demand being high - but clearly bot demand to farm with it
BarNo3385@reddit
Fair - this isn't the same article but I can't find the original, this was some similar numbers though;
https://rural.struttandparker.com/article/attention-to-detail-key-to-improving-arable-profit-margins/
I'd completely agree that there's a bigger point here about farming profit margins. Effectively farmers have got caught between supermarkets with colossal buying power, and governments which want cheap food in the shops. In practice what that means is the UK overall is shifting more and more towards a policy of importing food from other countries which have lower production costs (either because of lower standards or pure economies of scale. Farming absolutely becomes more profitable at scale, and how can a 500 acre UK farm compete with say a 25,000 acre Australian one.)
Ultimately we either need to decide that low food prices and the benefit that provides to the majority of the population is worth losing some / most / all of the domestic agricultural industry - in which case removing the Agricultural Relief subsidy makes sense. Or we need to value domestic production as a benefit in and or itself for security and environmental reasons in which case we need to accept prices are going to go up. (Probaly by putting some kind of tarriff on imports to allow farmers to leverage a higher price, and do something to balance supermarket buying power). And with higher prices and therefore profit margins for farms, paying normal IHT wouldn't be a problem.
Wolifr@reddit
Only each acre over the £1-2.5million IHT allowance. If you have 100 acres or less you won't have to pay anything. Average farm in the UK is 202 acres, there's >£2m allowance for married couple so you wouldn't pay any.
OR, if it's a family farm you gift your children shares up to the gift allowance whilst you're alive and further reduce the amount liable for IHT.
This tax is to stop people buying a £10 million farm to leave to their kids as an IHT tax dodge.
BarNo3385@reddit
If you've got £10m to splash on a farm for tax planning purposes you have plenty of other ways to avoid IHT. Sure this might specifically stop agricultural land being used as a dodge but it won't stop dodges in general.
You're correct that a smaller farm will sneak under the allowance, though given farm equipment and machinery is now also included in the IHT allowance, it's not as simple as c. 100 acres and under is free. If your machinery is worth 300k then you're down to a 70acre farm and so on.
Plus of course smaller farms are even less profitable since economies of scale are important. So, maybe this just succeeds in demolishing a lot of marginally profitable farms, whilst allowing unprofitable ones being used either as lifestyle trappings, (or lower value wealth transfers), to continue on. Still seems an odd outcome to pursue.
Wolifr@reddit
The argument that we shouldn't close this IHT dodge because there are other IHT dodges doesn't really hold up.
BarNo3385@reddit
Well then neither does the argument you needed to remove this exemption because that way you'll raise more from people who were buying land specifically to dodge IHT but no longer qualify.
Or I suppose you'll catch the 20 or so people who unfortunately die between when this comes into force and they finalise moving the assets into something else, or putting the land in a trust, or a limited company, or gifting it, or, or, or, or.
Morris_Alanisette@reddit
But only for the part of the farm worth more than 3 million (assuming the owner does the bare minimum of planning).
So using your figures:
A 300 acre farm would pay no tax.
A 500 acre farm would pay £400000 tax which would be 5.5 years of profit.
But the farm can be passed down the generations before death anyway. If the owner lives another 7 years there's no inheritance tax. I can't really see how this affects family farms at all. It's like it's all fabricated by rich people who bought farms as a way of saving inheritance tax.
ImBonRurgundy@reddit
I think OP's uestion though is "why is the land so valuable" If the yield from farming is so poor, then the land should be worth a lot less.
the answer, ironically, is that because you can inherit the landtax free, this makes it worth a lot more.
BarNo3385@reddit
Only partly- as I noted above the potential to use the land for house building is also a significant factor. Most farmers would be "economically" better off by selling their land to a developer and letting it get concreted over.
Removing the IHT loophole may help dampened demand and thus land valuations. But it'll depend on how much of the price is stemming from that and how much is hope value for redevelopment.
That will likely also vary a lot by region. If you're in non-green belt commuter country outside London, development value will be a big driver. If you're in the wilds of Northumberland, it's more the IHT loophole.
ImBonRurgundy@reddit
I don't think that has anywher near as much impact as you think.
only a tiny fraction of land is build upon (something like 2% IIRC), and about 70% is used for agriculture, so even if we doubled the amount of houses (something that would take decades) that;'s still only a small fraction of land that was previously farmland that now has houses on it, that still leaves 68% of the farmland.
nobody is speculating on farmland generally because of a tiny possibility that maybe it will have houses on it one day (except in very specific cases where the stars align)
Surface_Detail@reddit
It's a marginal tax though. You'd only be paying 200k if the farm is worth two million.
CallMeKik@reddit
Do you think this will make people less likely to buy farms/ land?
BarNo3385@reddit
Possibly - the benefit to buying up land as an easy way to pass on wealth has now gone; though worth noting the very affluent already had ways to get round IHT through trusts, companies, offshore wealth and so on.
IHT is basically only paid by the upper-middle to upper-lower affluent bands anyway. Below that you don't have the money to be impacted and above you have the means to avoid it anyway.
Also if you're looking 10, 15 years into the future, the likelihood is this will be a one term government and both the Tories and Reform have said they'll reintroduce agricultural relief. So you may well still get people banking on a change coming in 4-5 years time anyway.
CallMeKik@reddit
I think you’re right that some people will try to hold out for a change. I read somewhere that people did try to hold out with the whole short term let changes.
The annoying thing about policy is it’s hard to predict what kind of “steady state” it puts the system in.
Right now I can agree it looks too harsh if you make certain assumptions about yield/ land values. But if it pulls down land prices then the relative yields would go up meaning that the pay off period will greatly shorten.
Perhaps rich people might buy other stuff to hold the value. Sometimes shaking things up like this has positive knock on effects. Maybe they spend money on things that bring different value to society. Or they’ll finally invest in our milquetoast stock market and we’ll start bringing in some crazy international speculative investment.
On the other hand, if the value of the land dried up too rapidly, we could totally have just burned a lot of wealth that now can’t be re-invested. I think this is less likely to happen since we are using IHT as the tax mechanism, so its impact might hopefully be slowed.
I’m going to be cautious to judge it for now.
BarNo3385@reddit
Personally I'm generally an advocate of "wait and see" in all things economic - as the saying goes; the economy is a Tiger. If you poke it it will definitely jump, but you're never quite sure in which direction.
If this results in land buying for IHT planning purposes to drop rapidly maybe land prices reduce and actually more farms become exempt.
Maybe it does result in a collapse of the domestic agricultural sector, food prices to spike and the UK to become even more reliant on food imports. At that point it becomes a different policy question - which is what value we place on domestic food production as a national security issue. This was always really the driver behind Agricultural Relief anyway - yes it's a subsidy to farmers, but that's because it was seen as desirable to have a degree of food security higher than that provided strictly by market economics.
Personally I'd just abolish IHT altogether which solves the problem. Simply roll the book cost over to the inheritor and then charge CGT when/ if they sell.
CallMeKik@reddit
Thanks for the discussion, it’s been refreshing to have a thoughtful from someone with a different viewpoint on reddit lol
BarNo3385@reddit
Pleasure :)
QwertPoi12@reddit
Wouldn’t it only be taxed on the value past 1-3 million at 20%?
jugsmacguyver@reddit
The ten years is an existing thing that applies to Trusts. Exit, Entry and Periodic charges.
Ok-Blackberry-3534@reddit
Dukes have probably owned the land for 1000 years.
FeGodwnNiEtonian@reddit
I wonder why they're owned by trusts. Something normal I'd assume.
Maetivet@reddit
You mean they have 6-months, like every other non-farmer gets when it comes to IHT, albeit every non-farmer has to find twice as much.
Thugmatiks@reddit
Still paying much less than the 40% someone would have to pay when it’s a house instead of a farm.
Aconite_Eagle@reddit
Doesnt matter to the country if you can't pay for your house though. It matters big time if we have no farms.
silentv0ices@reddit
But we will still have farms just different people farming them. Hardly any farms will actually ever pay anything.
Mfcarusio@reddit
This is the crux that needs to be addressed rather than playing around with IHT.
Farms are, for the most part, hugely dependent on the government in terms of the economics of the whole thing. If the government affects one aspect of that, such as changing IHT rules, they should have considered the whole farming industry in terms of levels of support.
Most people think it's probably fair that far inheritance isn't treated any differently to the family bakery being handed down etc etc.
But if a farm is worth 5million and we want the family to continue farming it, we should make sure that it's a profitable asset.
Funguswoman@reddit
But if they let the land out on agricultural tenancies they've been getting Agricultural Property Relief at 100%, so no tax actually due at the 10 year anniversaries?
Whoisthehypocrite@reddit
I think that the trust.has to farm the land and bear profits and losses to get the relief?
Funguswoman@reddit
There is also relief for landlords of agricultural land (which I personally think is entirely wrong and should be abolished). I'm not aware of any provisions which exclude trusts from receiving agricultural property relief as a landlord.
-Enrique@reddit
If they are Dukes then they likely inherited the land rather than buying it. This apparently phenomenon of buying farmland purely for tax avoidance purposes is relatively recent in the grand scheme of things
StupidMobileWebsite@reddit
Yes, and it's not insignificant
Marxandmarzipan@reddit
Yep, people who had no interest in farming at the time of the purchase. Only 44% of farm land is bought by farmers, the rest of the rich to avoid inheritance tax. If this tax loophole didn’t exist, farmland would be cheaper so cheaper food for us, and the total value of a farm would be much lower so far fewer farms than so now would be dragged into income tax.
U-turning on a policy that annoys rich landowners but would be beneficial for everyone else would be immensely stupid.
DarkDragoness_89@reddit
If I've understood correctly, then a claus stating that if you own and also actually work the land to produce crops and make money (and have proof of this over a minimum set time period) that it would lower the inheritance tax paid on that land. Could that protect generational farmers (and food supply) but still accurately tax the rich buying and renting the land back to be farmed by someone else just to avoid inheritance tax. ?
I fully support the actual working farmers this could unfairly affect, but agree that a policy to stop the rich money hoarders needs to be maintained.
Christmastree2920@reddit
If they own and work the land themselves, would this not attract business property relief, rather than APR? Honest question here
ImBonRurgundy@reddit
it would be better IMHO just to directly subsidise the farmers themselves, and make their businesses more viable, rather than giving them relief only after they are dead.
mmoonbelly@reddit
Hard to validate. Many working farmers have to run side businesses to keep their farms going. (Eg eco-tourism B&Bs in cottages) That time could be considered not working the land for agriculture, despite the revenue keeping the farm going.
It’s capital intense and low margin with high personal risk.
n1cpn1@reddit
I’m sure there’s a way to only affect the “rich” land owners if the government wanted. Increase the limit to 10m and charge 40% tax on it.
Give a personal allowance on paying the tax. Ie the first £50,000 of profit isn’t used to pay off inheritance tax. Anything over that 50% goes to the government until everything is paid. If it only impacts a small number of farms then how hard can it be to administer? Even if it impacts 70,000 how can it be more complicated than the student loan scheme?
silentv0ices@reddit
Hilarious that you think someone with only 10 million or more in assets are rich.
Farrjac@reddit
I don't understand how this would result in cheaper food, the value of the farm doesn't factor into the cost production of food? For farmers that inherit a farm and have to pay IHT over the gov. loan period this would increase their costs and result in food inflation. Interesting point on it being a way for rich people to avoid IHT I had not heard of that before.
ProofLegitimate9990@reddit
Most farmers rent the land they farm on, if there wasn’t a tax loophole they could own the land themselves or rent for a lot less.
Whoisthehypocrite@reddit
If the owner of the agricultural land is doing it for IHT they have to get someone to farm it or it fails. When someone owns an asset for non return purposes like IHT they generally are happy to settle for a lower return so rents aren't necessarily higher. Same reason why people buy certain UK gilts at lower yields because they avoid CGT.
That is not to say I don't support putting IHT in agricultural land to stop abuse
thevo1ceofreason@reddit
We already have cheap food. We spend much less on food now as a proportion of income than ever before.
Part of the farmers problems come from not getting enough money for what they sell, and it leading to the need for high amounts of debt and reliance on subsidies.
Farrjac@reddit
Can you provide source that only 44% of farm land is bought by farmers?
praise-god-bareback@reddit
https://rural.struttandparker.com/article/english-estates-farmland-market-review-winter-2023-24/
Thugmatiks@reddit
Absolutely spot on!
wayneio@reddit
James Dyson is one of the worst for this. He owns half of Lincolnshire
Justboy__@reddit
If most of them rent the land, then actually this policy doesn’t affect most farmers and actually does target the correct people, surely?
MintberryCrunch____@reddit
It's not just the land as far as I can tell, but all the things involved with working the farm, they were talking about tractors which can be incredibly expensive. So I assume if you have lots of equipment to work a large farm you still have a a big value of assets to pass down.
SpareUmbrella@reddit
This might be a little simplistic, but wouldn't it seem like the solution then is to change the tax relief currently offered to farmland to tax relief offered instead on farming machinery?
Land will always retain value to anyone, but farming machinery is only useful to... well, an actual farmer, and notably it would depreciate in value over time anyway, so doesn't make sense for rich people who do not farm to invest in it, because then they're investing in something guaranteed to lose them money.
11Kram@reddit
Farm machinery needed a few times a year is generally provided by contractors.
NickEcommerce@reddit
I feel like there are a few steps that could make the whole thing fairer;
The above would go some way to fixing Land Bankers, protecting family farmers, and keeping land out of the hands of mega-farmers and corps like Monsanto who can afford to drop £20m on farm land every month for the next ten years until the own all of Britain's food production.
FwkYw@reddit
So my uncle owns a farm. Outright. It's fucking massive and has multiple properties on it and is fully functioning as a dairy farm with a couple of hundred cows and he also grows a lot. He has a collection of Massey tractors, including valuable classics, that is so big that they did a spread on them in the Farmers Weekly magazine (or whatever the fuck it's called). This inheritance tax won't impact him. With all that in mind, I think the few (4% I believe?) that are wealthy enough that they can suck it up and pay the halved, interest-free tax over the 10 years.
MintberryCrunch____@reddit
So I was just answering to what that person was referring to, which is those who rent their farming land and don't own it. They still have wealth without owning the land was my understanding, and therefore have to pay based on total value. Mainly that machines can cost hundreds of thousands depending.
Your Uncle owns a big farm and doesn't rent out any of his lands to other farmers? Is it all his?
silentv0ices@reddit
They would need to have 1.5 million in assets before they had to worry, 3 million if a couple. That's a lot of tractors.
cbawiththismalarky@reddit
They lease a lot of the machinery
BrissBurger@reddit
I'm not a farmer but have a relative that had a small farm and I was told "most" farmers can't afford to buy machinery so they hire it when they need it or even club together with other farmers to hire at cheaper rates. If that's the case then the expensive machinery won't be inheritable assets in most cases.
asmeile@reddit
my uncle used to be a farmer and is now a lecturer at a uni, he says that almost all farm machinery is on hire purchase
BeardySam@reddit
Yes. It also decreases the price of land which is good for farmers but further annoys the gentry
Nice-Wolverine-3298@reddit
Except that they will be outbid by speculative buyers (developers, hedge funds etc.) whi just sit on it as these rules don't apply to companies. Last I checked, the supermarkets and building companies had something like 1m acres in reserve. There are a lot of issues that this policy will only compound and not address. And we can throw in more expensive food that needs to be imported as a nice unintended side effect.
easy_c0mpany80@reddit
Yes, we barely have any space in the UK and to think that this law will miraculously lower land prices is laughable
saladinzero@reddit
Now now, that's not fair. It also annoys nouveau riche people like old Jeremy. That Dyson also ends up with egg on his face is just a bonus.
GammaPhonic@reddit
Why are farmers upset about the changes then?
Genuine question, btw.
Competitive-Toe-9788@reddit
For people who are working 12 hours a day with minimal breaks and days off going through the process of setting up inheritance planning is a lot of extra work to fit in.
It's a large additional cost in finance and legal fees for people paying themselves less than minimum wage even if they don't end up needing to pay the tax.
There are a lot of old farmers, especially in family farms, that may not live for the 7 year gifting period or don't want to be forced into retirement. Life insurance can help but that is another additional cost.
There are genuine concerns about the methodology used to calculate those affected. Farm equipment, buildings, livestock etc. used to be claimed under business tax relief not agricultural relief. These have now been merged so looking at historic agricultural relief claims alone are undervaluing farms. This makes it difficult to trust anyone using the figures as justification.
The government has been reluctant to pin down what they define as a farm. When they claim most farms will be unaffected they include anyone with a patch of land that claimed the relief. This does little to reassure even the smallest commercial scale farms.
There is a perception of betrayal of the farming 'social contract'. That farmers would put up with low food prices for the good of the country if the government left them alone. Even unprofitable farms produce large volumes of food.
The general opinion of farmers since the 80s is that the government has been trying to phase out food production in the UK. There has been the push to get farmers to diversify into anything other than farming. The new subsidies are there to encourage reducing production and re-wilding but don't help the actual farm business. The level of inspections, oversight and paperwork needed to continue operating is increased every year. In this context, the move by the government looks like the final death knell to finally get the farmers to sell up.
Aconite_Eagle@reddit
Because, as a farmer, my son is going to be unable to farm my farmland unless I put it in trust before I die.
worotan@reddit
Except you’re not a farmer, you’re just shitposting about something you don’t know.
Aconite_Eagle@reddit
Lol fuck off mate you havent got a clue.
worotan@reddit
Look at your post history, stop making things up so you can shitpost.
Aconite_Eagle@reddit
Literally idiotic opinion.
GammaPhonic@reddit
Why is putting it in a trust an issue?
Ok-Cantaloupe3824@reddit
Speaking to a farmer friend about this today and the issue seems partly lack of clear information on what this means. The headline about farms valued over £1m includes an awful lot of farms based on land value. Uncertainty and anxiety about a significant change done to us is always a source of fear.
Lots of farmers have had a rough time for quite a while. It can be a lonely job and social media is full of attacks on many aspects of farming ( dairy and meat farming, need for land to build housing, perception they are rich and all go fox hunting). There is a mental health crisis and high suicide rate in farming, particularly young people who work long days in isolated industry.
MiddleAgeCool@reddit
Because if you're a land owner and rent your land, you know you have an inheritance bill around the corner so you either sell the land to someone who wants to for non farming activities, leaving the farmers who rent without a farm, or you increase the rent to cover the cost of the eventual tax bill, putting further costs on the farmers who rent the land.
GammaPhonic@reddit
That’s a good point. Although, in that case I think it’d be better to introduce protections on rented farm land rather than allow the super wealthy to continually dodge taxation.
I don’t really know anything about the issue so there likely something I’m missing.
Wrong-booby7584@reddit
Because the Torygraph and Daily Heil told them to be upset.
Conscious-Ball8373@reddit
This is part of the answer, but only part of it.
If you're someone who actually farms, farmland is a scarce and not very fungible commodity. If you're set up to farm the land you have, you're probably also pretty well set up to farm twice as much land; the main thing constraining your income is the amount of land you own, and the average UK farm is tiny compared to other developed economies. If you're looking to acquire more land, you want the farm next door, not one ten miles away. Even one mile away is a major problem for farmers who keep livestock; the farmer next door to us regularly herds cattle across an A road and it's a major pain, for him and everyone else.
Farm land has generally stayed in the same family for generations, so the chance for a farmer to acquire more land that is in a place that works for him is vanishingly rare. When it does come up, he's going to be prepared to pay more than looks like it makes sense because he knows the opportunity won't come up again soon.
To some degree, consolidation is needed in the UK farming sector. An average farm size of 250 acres (and plenty that are a lot smaller than that) is just not sustainable. It's only really limping on now because people are prepared to pay more for British-grown food and the government hands them tens of thousands of pounds of taxpayer money each year. At the same time, if it was me and my family had been farming there for three centuries, no way would I want to be the one who let it go. Farmers have an emotional connection to their place that non-farmers find difficult to understand.
Full disclosure: I'm a non-farming son of a farming family.
Wrong-booby7584@reddit
Dukes of Hazard?
Festivefire@reddit
The UK has gone full circle to peasants not owning the land but farming it to pay rent to a noble landlord, Feudalism is back baby!
Spirited_Praline637@reddit
A lot of city boys too, sink their ill gotten gains in farmland.
Snoweater7@reddit
In the US I believe it’s Bill Gates, same same
ContentWDiscontent@reddit
You might be in the wrong sub. This is askUK
localzuk@reddit
I think part of it is that the "profit" part is just that. Profit. It has had all the costs that can be squeezed out of it removed.
The car they go to the shops in? Probably a farm vehicle, so while the rest of us would pay for it from our salaries, it has been pre-paid before the "profit". Applies to loads of things.
So, if that figure included all the costs we all pay from our income, I suspect the actual income for farmers would be considerably higher.
Boris-the-liar@reddit
Why do you think the multi millionaire car freak…sorry, I meant horny handed son of the soil and man of the people Jeremy Clarkson invested so much of his ill gotten gains in a farm? Tax shelter or sudden love of the smell of cow shit? You decide…and to help you a few facts…a total of 122 farms in 2021 would have had to pay inheritance tax under the new rules…1.25 million tax free, then 20% on the rest…not the 40% you and I have to pay on anything over £325,00…
purely_specific@reddit
ill gotten gains? How do you mean? Didn’t he make his money off being on top gear and doing all manner of ‘tv things’?
Boris-the-liar@reddit
Ill gotten refers to the tv things and top gear in my opinion..£4.4 million of em he paid for 1000 acres of the Cotswolds. Top 10%by size of farms in the country…but he really shouldn’t be crying so loud,big soft shite, because £2.6 million will be covered by his lawful allowance. All that whining about 360 grand.
BDbs1@reddit
I’ve never watched a second of any of his television programmes, and I don’t care one bit about him, but of all the things to call “ill gotten gains”, being a tv presenter seems a stretch.
Iain_M@reddit
Often it’s £500,000 if it’s your home and given to your children or grandchildren
WelshEngineer@reddit
The point it that it is crippling to a farm business, and machinery holds a lot of value even if it's very old. This can include machinery over 30 years old which they cannot afford to replace if they are forced to sell it.
It's disingenuous to suggest that it's a case of everyone else paying inheritance tax because that's not the case and for those outside the farming community inheriting your parents house has no bearing on your employment and income. Essentially it's surplus wealth which is easily liquidated without negativity effecting your income.
For farmers, their income is directly related to the businesses ability to stay viable, which isn't possible when average profit margins are 0.4% and you have a tax bill of 20% forcing you to sell essential assets which renders the business unable to operate.
If the tax only happened if the kids chose to cash out instead of working the farm then there wouldn't be this issue. But instead this is taxing farmers well above their income level.
ScallionOk6420@reddit
Because the land valuation includes a huge "hope value", which is added on the basis that one day, the land might be approved for building on.
One_Lobster_7454@reddit
You say that but most farming land is not going to built on anytime soon, unless it's directly outside a town or village it's not going to get built on
ScallionOk6420@reddit
It is notheless true.
MrMonkeyman79@reddit
Farming involves owning lots of land and land is valuable.
Plus the equipment, I believe a combine harvester for imstance is worth around 500k.
There's a lot of money going in and out of a farm, but profit margins can be tight.
Jabberminor@reddit
I've never seen profit data from farmers. They all say that profits are tight, but what exactly are those profits? I'm seeing mixed things on Google.
FridayGeneral@reddit
OP is asking why it is valuable, so confirming it is valuable does not answer his question.
asdf0897awyeo89fq23f@reddit
Hence the market for renting them
Various-jane2024@reddit
you will own nothing and be happy mindset
baildodger@reddit
If you’ve got enough cash lying around to drop £500k on a combine harvester you can probably afford to pay inheritance tax.
blankbench@reddit
Vast majority are bought on finance.
Gungadin34@reddit
Only someone with absolutely no business sense at all would buy a combine outright. Take it out on finance and then work as a contractor and use the income from that to repay the finance, then instead of costing you £500k, it only costs you time.
EsmuPliks@reddit
Well... not by definition.
If we 1. Don't make it an obvious tax loophole asset 2. And don't set precedents for granting changing use of farmland
and all you got is farmland, only to be used for farming, it's generally not that valuable in most countries.
heliskinki@reddit
^ nailed it.
The_Blip@reddit
Problem is when the government changes the rules change.
I say the tax gets waved if the land owner puts a restrictive covenant on the property.
EsmuPliks@reddit
Yeah, I'd say that makes sense, with possibly some level of penalty for not using it too, to get rid of dickheads like Dyson.
warriorscot@reddit
New equipment is expensive, but leased equipment is not and neither is older equipment. It's not quite that simple as a great many "farmers" own only the equipment or the own only the land. The confluence of the two is people with a lot of money.
The chap on Sky this evening was hilarious.. supposedly a profitable farm, with an 80 year old dad. Nobody stopped them passing it along earlier, they didn't have to, but it didn't cost anything to do except maybe letting the kids bail out before they sunk cost a career as a farmer in their 40s. And the worst consequence for him is he becomes a millionaire 20 years before retirement and could likely earn a safe salary on someone else's farm if he wanted to work...
Not that sympathetic. If you want to be a farmer sell the land, pay the tax and go farm some other land. And if it drops the price of farmland then you'll either be able to afford it or not have to pay the tax...
And they blame the treasury for getting the figures wrong. They didn't, they saw a market failure and they fixed it because economists don't need to care about multi generational privilege and habit.
anneomoly@reddit
200 average dairy cows are worth about £700,000 and each cow will generate a profit of about £400 a year.
That's without taking the value of the land they live on or the buildings that they live in/get milked in or the tractors that move their hay around. (And a tractor can be a quarter of a million by itself)
27106_4life@reddit
We just need a property tax like America has
Nyx_Necrodragon101@reddit
Farmers typically farm because it's what they've learned. They've done it for generations and it's a point of pride. Others do it for a labour of love. They love what they do. Farms are asset rich cash poor always have been and with land being at an all time high the cut to APR is massive.
One of the things about land is it's finite. There's no new land being made so it's not like you can just make more to flood the market. Also every time someone pays overmarket price that becomes the new value.
km6669@reddit
The trouble is, and the elephant in the room here, that just because they've done it for generations doesnt mean they're any good at it. The previous government was trying to get a load of them to retire to allow people who have been trained to come through.
Nyx_Necrodragon101@reddit
If we're eating they're doing it well.
I do understand what your getting at though and yes the younger ones need to to be in charger sooner but that requires mum & dad to retire which they can't do because their pension (if they have one, big if there) is pretty crap.
Not everyone can get into farming its actually incredibly hard mostly because it demands a huge amount of capital. What's more is hardly anyone wants to get into it but its hard work with very little pay and every looks down on you.
What is going to end up happening is these small family farms will have to sell to pay the IHT and American style factory farms will move in who care about nothing but the bottom line.
km6669@reddit
"who care about nothing but the bottom line." I see this arguement a lot, why should we be grateful for inefficiency? Surely the better a farmer is at farming the bottom line reflects that.
Farmers aren't farming out of the goodness of their heart. They're doing it for cold hard cash exactly the same as any corporate farm would. If theres no money in farming, as farmers seem to always claim, what possible motivation would a corporation have to run a farm? Something doesn't add up with that vague threat of 'corporate farms'.
Nyx_Necrodragon101@reddit
Not necessarily there are other aspects to consider. The animal's welfare. The sustainability of the farm. Happy, well cared for animals produce better product. Factory farms don't care about that sort of thing and would set farming standards back decades.
That goes for crops too. There's a particular type of GM crop that has pesticides bred into it and has been linked to cancer. Cheap to produce if you don't mind getting cancer. The company, Monsanto is trying to hide it.
FeistyUnicorn1@reddit
The correct answer!
AddictedToRugs@reddit
Land.
BriefAmphibian7925@reddit
For one thing there is a lot of friction. Farmers and their families who own their own farms are reluctant to change their lifestyle etc and learn some new career, even if the "rational actor" economics of the situation would point that way.
It is also true that speculative investment in farm land, not so much to make money from the farming (via rents from farmers etc) but from future development of housing, harvesting of fees and subsidies related to green energy projects, etc, is certainly a thing.
ImBonRurgundy@reddit
ironically, at the values we are talkibng about here (£3m+) they wouldn't even need to learn a new career.
chuck that £3+m into a passive fund and live off the returns forever, earning far more than you make as a farmer (apprently)
sayleanenlarge@reddit
We need farms though. How else will we feed ourselves?
jaymatthewbee@reddit
Learn to code, eh?
BriefAmphibian7925@reddit
Turning over more farmland for development (eg with less restrictive planning permission) would likely have short-term economic benefits, at least. It would also make our food security (which is already terrible) even worse - you can come to your own opinion on the wisdom of that given all the geopolitics that is happening.
WRM710@reddit
There are some industries, food, medicine, steel, power, defence, etc, that matter more to a country's security and therefore economy than their specific contribution in pounds. We do not live in safe times, there are wars and powerful unstable leaders. We cannot rely on just importing everything from overseas
OldManChino@reddit
The correct move in farming is diversification, and plenty are willing to do that.
web3monk@reddit
Farming is profitable when alls said and done.
It's not profitable if you're Jeremy Clarkson and buying this and that machine every two seconds and employing people to do all the hard work and leave subsidies you receive out of your calculations but MOST farmers are not making a loss year in year out.
Most farmers rent the land they farm, and even they are turning a profit with the added pressure of paying rent.
Not saying its easy, and mostly I support farmers, we need to grow food in this country, but this latest thing seems to be the very very rich / elite who have co-opted the general feeling of farmers - that they're making less than ever - to their own benefit (to not pay inheritance tax a slightly higher amount of inheritence tax that is still vastly less than everyone else and only on the most valuable farms in the country).
ImBonRurgundy@reddit
100% this.
when clarkson did his sums and showed how little money he made, it was total nonsense. of course someone like Jeremy clarkson is going to make no money running a farm. he made so many awful decisions (either unintetnionally, or just playing up to the camera).
if you put him in charge of any business he knows nothing about and made a tv show for the lols like that he is going to stuff it up
Vespa_Alex@reddit
Farming is profitable when you take into account all the subsidies and other potential income streams, or they’d have all gone bust.
ImBonRurgundy@reddit
I know several farmers, (people who own farms, not tenant farmers) and every single one of them sent their kids to private school
their income looks much lower than it is because most of their 'costs' are part of the farm.
one of my parents friends coudl afford to send all their 4 kids to private school. When it came to univesity they got the maximum support because means testing showed virtually no income, but they still bought a house in the student area for their kids to live in instead of paying rent.
they since retired, the dad passed the farm onto his oldest son a few years ago. (not sure what the other kids got)) and now the retirees own 6 (six!) pubs in the local area which provide them nice income in retirement.
theModge@reddit
Almost all seem to diverify one way or another, clay pigeon shooting is also popular
asdf0897awyeo89fq23f@reddit
I used to work in a similar business and it taught me that the uwuification of farmers is rubbish. They're as savvy and tight as it gets.
The_Blip@reddit
The problem is, some say, that farming isn't profitable enough. Some farms make no money from operations. Lots make very little profit.
Thing is, some tend to exaggerate their lack of profits. Farming can be very volatile. A bad season in a local area for a specific crop can essentially ruin a farms profit for the whole year. Then they can run regularly the next, or have a great harvest.
WelshEngineer@reddit
Most of those subsidies are long gone. The problem is people are not willing to pay the extra 50% their food should cost if it was priced fairly
BppnfvbanyOnxre@reddit
A lot of those EU subsidies that some politicians promised to replace did not get replaced, Quelle surprise.
pippysquibbins@reddit
and they all rent out glamping pods or buy up local housing to rent out.
Superspark76@reddit
Farm land and farms are very large assets, some in the millions.
They have been bought when the land was a lot cheaper and it's unlikely most farmers could afford even a percentage of their own farm if they had to buy from scratch
KnarkedDev@reddit
You're saying farmland is expensive because it's expensive - why is it expensive if you can earn fuck-all from it?
Superspark76@reddit
It isn't just the land, between the machinery, livestock, buildings and other assets the average farm asset value is in the millions.
Most of this has been purchased over time, the farm income is used to maintain and purchase more assets to run the farm. Most farmers take very little out of the farm, many running into debt constantly.
The existing farmers children would usually work the farm from as soon as they are old enough, they get paid usually well below minimum wage, they don't have many outgoings but don't really have much to save, to expect them to be able to pay £100000s will be nearly impossible without getting into debt or selling a lot of their family assets through probate.
ImBonRurgundy@reddit
so even without IHT, farmers options when their father dies seem to be:
Option 1
be consigned to earning minimum wage for the rest of their life, but have an asset worth £4m (that that can never sell or get a better yield from)
OR
Option 2
sell that assets for £4m and set family up with generational wealth purely living off the interest (£4m can give you a very easy income of £150k after inflation)
and most choose option 1 it seems.
IrisAngel131@reddit
Because it's land on a small island. Think how many houses or shops or warehouses or other shit you could put on it. That's why it's worth a lot. We can't make any more land, what we have will go up in price at least with inflation and more as the population grows.
11Kram@reddit
Most farmland would never be zoned for housing shops or industry.
drplokta@reddit
Only about 2% of our land is built on (3% in England, much less in the rest of the UK), so new building can't possibly mop up more than another 1% or so. (You will see a larger figure quoted for the "built-up area", but only about a quarter of the so-called built-up area is actually built up -- the rest is gardens, parks, verges and other green space.)
warriorscot@reddit
That's not really it, the UK has large swathes of the lowest population density in Europe. Its just all been reserved by massive landowners, which was fine when agricultural land was basically cheap enough to be pretty transactional.
What happened was inheritance rules incentivised a second land grab by the wealthy and that drove the price up. Then we layer common agricultural policy and attached subsidies to land.
Agricultural land without any planning permission or likelihood of it should be 2 or 3000 an acre not 10000+. Areas of low quality land and woodland should be effectively free to anyone that wants to maintain them or operate small holdings where profitably is less of a factor.
Katiescanlon_@reddit
exactly
Colloidal_entropy@reddit
1: Rich people e.g. Clarkson and Dyson buying agricultural land as an inheritance tax dodge. Increasing demand and hence price, the marginal buyer isn't a farmer but someone looking for a tax free investment.
2: The development lottery. If your farm could potentially be zoned for development, primarily housing, but also things like HS2. Then the value increases dramatically. Therefore break even farming to keep it in the family is justified as your children or grandchildren might hit the jackpot. Decreasing supply and increasing prices.
JamesyEsquire@reddit
I feel like the rule would work better if the tax was only applicable if you sold an inherited farm?
AyeAye711@reddit
Supermarkets pay almost nothing for their food so that we can buy food at affordable prices relative to our meagre wages. Farmers are subsidised by the government (our taxes) instead so that they can just about survive while growing our food.
mrmaker_123@reddit
Land baby land!
This is also the only reason why the farmer’s inheritance tax story is currently in the media. It’s nothing to do with farmers and everything to do with the landed gentry who want to horde their wealth.
11Kram@reddit
Hoarding by the horde isn’t possible.
Learning-Power@reddit
Case study:
200 acres on the outskirts of a nearby town in Oxfordshire. With no planning permission the land was worth about £2 million.
The property developers successfully got planning permission to build new homes on the entire 200 acre plot.
The farmer then sold it to them for £95 MILLION.
Farm land is a lottery ticket: if you get planning permission you are made for life.
ubiquitous_uk@reddit
They have a large amount of land for farming that also contains tractors and other farming equipment that doesn't come cheap, and normally a fair amount of properties that all have value. On top of that, the crops / livestock all have value, so the farmland has a high nett worth. The figures the government have been using for their stats are the values of the actual farmland and not the other assets that would also be included, and this is why farmers are saying its a lot more than 200 that will be affected.
The problem farmers have is that if they have a bad season, it can take 2-3 years to make those losses back before they even get back into the black.
I totally get the arguement that if everyone else has to pay it, so shoudl they, but sometimes you need to weight up the positives to the negatives. If farmers then have to sell land to pay the tax, farms become even less profitable as the economies of scale goes down. Its then a short jump to the land being used for building homes (that yes we need) but in return we lose the ability to feed ourselves.
Either way, i'm just glad its not a decision I have to make.
Boris-the-liar@reddit
It’s not farmers! These new rules effect almost solely the massive parcels of land that are being snapped up as tax shelters! Land has almost become a non fungible token, it’s worth as a tax shelter far out strips its tangible worth as farm land. Arguably, these rules will devalue the land which in turn will allow genuine farmers ie tenant farmers the ability to buy their own farms…
ubiquitous_uk@reddit
I totally agree with land owned by the billionaires holding the land for tax purposes, but they won't be affected by the law change as they will have ways around it.
However it is the farmers that will be disappropriately affected.
Boris-the-liar@reddit
According to the institute of fiscal studies the total number of farms that would have to pay the increased tax (for2021, it’s the only figures that are available) would have been 121 farms. That includes the all the land bought exclusively for tax avoidance. They’re marching for the mega rich. It’s like the Jarrow March if it was sponsored by Harrods!
freddy6686@reddit
Thats 121 farms for that year only. The total amount of farms that will be liable over time is huge.
Boris-the-liar@reddit
They’re not farms!!! They’re tax shelters!! The majority of farms in the uk are tennat farmed solely because they can’t afford to buy the land off the owners because land is so expensive because of its massive tax benefits. A vicious circle. It wasn’t always like this the tax laws only came in the mid eighties and arable land prices have gone through the roof. If you want to feel sorry for farmers feels sorry for the guys whose leases constantly rise due gobshites like Clarkson who openly admits to buying 1000 acres of the Cotswolds for 4.4 million pounds just so he doesn’t have to pay tax on it
Thugmatiks@reddit
It makes it a less desirable purchase for these billionaires though. Which is a benefit to genuine Farmers.
warriorscot@reddit
Except the government used actuals not estimates. The values people mention often don't count at all or aren't real value. So either a lot of people are fudging figures and nobody cares or the value of a low profit business like any business is first and foremost its profitability rather than it's assets.
Even with relaxed planning rules there won't be a mass building spree. And huge swathes of the UK aren't food production anyway, it's not like we're running out of places to farm currently, we've got the cheapest food in the developed world and access to those other markets and nobody can cut them off so there's no dig for Britain requirement.
Ok-Pumpkin4403@reddit
Tax avoidance mechanism, will still be one after the changes, just to a lesser extent. We should either abolish all inheritance tax or make it fair (no special treatment for farmers), this is encouraging the wrong people to buy and hold onto farming land.
BroodLord1962@reddit
The value is in the assets, so the land, the machinery, etc. Things you don't earn money from unless you sell them
--Muther--@reddit
Think this short documentary summed it up
https://youtu.be/_pDTiFkXgEE?si=AArZET_IxgqpETmE
Puzzled-Leading861@reddit
Because land is very expensive.
Glorfindel42@reddit
Easy way to fix this is the farms that provide food/milk and actually farm, dont tax them. The rich folks who hoard land and dont farm it. Tax them and don't allow loopholes.
Bigbesss@reddit
Because it was a good way to not pay tax
asdfasdfasfdsasad@reddit
Farmers make a ballpark \~£100 profit from a 1 acre field, assuming an average costs and an average profit. Obviously if you have a highly profitable crop and particularly low costs then that might be 50% higher, or it might be 50% lower going the other way.
1 acre is 4046 square meters. A house is about 75 square meters and housing developers can cram in 14 per acre as a guideline.
Their costs as a ballpark are about £2000 per square meter, which multiplied by 75 meters gives you a cost of £150k and the average house cost is £299k, so a 1 acre field could sell for £4.485 million, with a profit of £2,235 million. Or £100 profit if you are unfashionable enough to actually grow food for people to eat instead of growing a crop of houses.
Orsenfelt@reddit
We're not making any new land
Farmland being completely exempt from IHT made it useful for people who had fat wedges of cash and an aversion to taxation.
Low supply, high demand = increased prices.
The_JimJam@reddit
Are they stupid?
Why not just build more land and export it? /s
insomnimax_99@reddit
The Netherlands has entered the chat
inide@reddit
We don't have to go that far, there's The Fens/The Wash. 1000 years ago half of Lincolnshire, Cambridgeshire and Norfolk were underwater.
gyroda@reddit
Go back even further and it reverses.
Bring back Doggerland!
mad-un@reddit
I'm pretty sure I heard my parents talking about going there one evening
Stumon_3@reddit
On first read I was like, "he must be meaning Diggerland" for family excavating fun, but then my dirty mind weighed in!
SausagenBacon@reddit
That would be one way of rejoining the EU!
SuperMonkeyJoe@reddit
Maybe we should reclaim some more farmland in the south east, that way the migrants can step off the boats and go straight to picking veg.
Disastrous_Fruit1525@reddit
Just bus them up to Lincoln as they get off the boats. Much cheaper.
DifferentWave@reddit
200 years ago where I live
The_JimJam@reddit
Take that Posideon! Even God's leak
imtheorangeycenter@reddit
What man maketh, Posideon will take from the Norfolk and Devon coasts. The futile battle will wage in eternity.
Disastrous_Fruit1525@reddit
There is loads of land in Africa and the Middle East. We should just go forth and take it for the glory of Queen Victoria and the empire.
IAdoreAnimals69@reddit
This would have been exponentially better without the /s! You're on a UK sub, don't cater to the idiots!
Wipedout89@reddit
r/fuckthes
TheKiwiHuman@reddit
r/fuckthefuckthes
The_JimJam@reddit
I simply don't trust anyone. Its what Cludeo has taught me
rice_fish_and_eggs@reddit
*be me, buys a slither of beach on a costal deposition area. Waits 10000 years. Now owns 300 acres, pure profit.
International-Bat777@reddit
30 odd years ago we did.
https://www.samphirehoe.com/about-samphire-hoe/creation/
ptr120@reddit
Land. They don't make it anymore.
spank_monkey_83@reddit
Land is always valuable, especially when you can get planning permission for a housing estate
AdCurrent1125@reddit
The land is one thing and the farm is another.
I could buy 100M of land in northern Scotland and try farming pineapples.
The farm doesn't bring in any money, but the land it's on has a value independent of my failed pineapple crops.
People aren't selling up because, as is widely known, lots of farms are multi generational family ventures and they don't know much else other than farming.
But look, if you want to see just how much they need to be discouraged to get them to say fuck it...just pay attention
AnonymousTimewaster@reddit
If you've got millions of pounds in assets you don't need to know anything else. If they're supposedly living on less than £30k a year then £3 mil is a very comfortable position to just live from. Get a financial advisor, watch that money work for you, and draw down £40k until you die.
hhfugrr3@reddit
Farm land is very valuable because it has had no IHT on it since the early 1980s. Therefore loads of very rich people buy it as a tax dodge - around 45% of farm land sold each year is bought by tax dodgers and a bit less by actual farmers - I presume the rest is sold for development. As a result, the price of farm land has increased significantly versus the actual value that can be extracted from it by farming.
Bright-Spot5380@reddit
Very people Including a certain J Clarkson
dwair@reddit
Clarkson is just a single individual amongst a sea of inventors working through shell companies in the Cayman Islands.
The changes in IHT is designed to hit small family run farms in a popularist knee jerk policy that will ultimately mean small farms will get bought up by those shell companies run by City bankers, Saudi Princes and Russian Oligarchs.
Sure Clarkson and a few fading pop stars will be collateral damage but this is about moving money from the poor but asset rich and giving it to the very rich and un-taxable.
The_Blip@reddit
"The changes in IHT is designed to hit small family run farms"
A several million pound cut off kinda flies in the face of that.
And the bankers and oligarchs trade farmland because of it's avenue to avoid tax. That's the value they see in farmland, not the farm operations.
Getting rid of the tax loophole gets rid of the incentive that's driving these people to trade farmland as an investment and artificially driving up the value of farmland.
UziTheG@reddit
The profit you can expect from 3 million worth of land (just the land, excludes all the equipment/buildings), is 30k. From 3 million worth. It's more efficient to purchase stocks and pay the fucking tax, cause a 1% yield with no tax is worse than an 8% yield with a 30% tax at the end. Your theory makes zero sense.
The_Blip@reddit
The value in dodging the tax is that the land can be bought inherited, and then immediately sold without tax, so annual profit doesn't really factor into it there.
UziTheG@reddit
Right, so rich people run a scheme where they magically know when they're going to die, sell all their assets, pay cgt, buy farmland, die, profit, then they're kids resell.
And obviously, they found the farm at argos, then magically found someone else to buy it the next day.
Oh, and let's not forget the fees associated with selling a farm. Approx 2%, each time, so 4% total. And then there's stamp duty. 12%. So 24% for cgt, 4% in fees, then another 24% for stamp duty.
dwair@reddit
What you are forgetting is that a farm that has a paper value of £3m isn't a big or even a medium sized farm though. It's one step up from a small holding and as a business probably isn't large enough to provide a merger living for more than two or three people. They are the corner shops of agriculture not the multinationals.
It honestly sounds a lot of money but when you consider that that 95% of that value has been created by an unchecked and artificial rise in land value it puts it more into perspective.
It's like saying that London is rammed full of millionaires because the value of property has gone up to a ridicules level over the last 20 years - yet most of the people who live in those million pound houses bought them 25 years ago for just 3x their salary, paid them off and are living on a state pension or earning around the average wage. They are also asset rich but money poor.
Just like London house prices, what you will happen is that the only people who can afford those properties are rich investors and land bank companies. Your average Joe has been priced well and truly out of the market.
All this IHT change will do is throw a bucket of petrol onto an already combustible situation, give some matches to a faceless corporation and ultimately push land value up even more. It's short sighted popularist bollox that only ultimately benefits the very rich.
Nikolopolis@reddit
Land is valuable.
Equivalent_Parking_8@reddit
Farm land is about £12500 per acre. Let's say you grow wheat, you'll grow about 2ton per acre which you'll sell for £400. That's before you take off the coat of your diesel, labour, fertiliser etc. if you have 100 acres and the farm next door has 100 acres, they want your land to create more product, so does the house builder, the solar farm, the turbine company. So you could sell your land and cash in. But that's it, no more farm, no income for your kids that have spent the last 30 years learning to farm, knowing nothing else, waiting to inherit the business. Now exposed to 40% tax on inheritance as you've sold it. A farm is more valuable as anything other than a farm, but that doesn't generate income, just wealth in paper.
Comfortable_Love7967@reddit
The kids can do literally any other job with 3million invested, even at 5 percent they would take home 150k a year or 75k if two kids.
Equivalent_Parking_8@reddit
Lucky them. You just assume they want to not farm and are happier living off interest.. do you think Jeremy Clarkson has to farm? What about his mate Kaleb, he's properly rich as well now. I have a friend that works as a lecturer but also farms sheep, he makes no money from the sheep. They do it because it's their passion. You can say the same about most musicians, sports people, actors, doctors, barristers.. You can't just take their way of life away from them and say don't worry you can live in a town and not work ever again.
jmh90027@reddit
Land, dear boy, land
RoutineFeature9@reddit
Just found some stats:
only 14% of farms are tenanted
54% of farms are owner occupied
31% are mixed tenure
These are figures from the government survey in 2021.
Jolly_Constant_4913@reddit
Eu land grants
bbll_bdby@reddit
Just watch Yellowstone. A pretty accurate depiction of land ownership and farming in the UK.
BarNo3385@reddit
Most of the value of the land is in its potential to be turned into housing.
For farmers that doesn't mean much - farming for most isnt a job, it's a way of life. You make naff all profit (if any) but you can usually make ends meet, and the journey is the point. These are people who work all hours under the sun for no pay, because it's fulfilling and it's what their parents and often grandparents and older did before them.
If you said "why don't you just sell the land off and turn it into houses" the answer would be "well where would we farm then?"
Given that, the IHT issue is that farmers who have no intention of turning the land into housing estates or solar farms are being taxed on the value of the land as if they were. And that creates a disconnect between the value of agricultural land in terms of its profitability, and the value of residential land.
PuzzleMeDo@reddit
Farmland isn't particularly profitable, but it's always been considered innately valuable. Maybe we don't need it now, but there's a good chance that at some point in the future the situation will change. Maybe there's a global food shortage, grain prices skyrocket, and we need every bit of farmland we can get. Maybe the government will want to buy that land to build a new town or set up a nature reserve or build a solar farm.
rat_fossils@reddit
Why is a heart so valuable despite not being profitable?
Swag-3000@reddit
As usual its because of greedy bastard landlords
BobBobBobBobBobDave@reddit
A lot of land had been sold off for other uses that generate more money.
Look at a lot of towns and there are housing estates and retail parks on land that 20 or 40 years ago might have been farmland.
The reason all the farmers don't just sell up is that many don't want to. It is a way of life and a family business. For a lot of them it would be a big deal to sell. A good friend of miner's family has a dairy farm that none of the kids really wants to take on when his parents retire, but they feel terribly guilty about that because of the family history there.
susususero@reddit
I agree with a lot of this but not quite on the 'way of life/family business' description as if that's exclusive to farming. There's plenty of people with non-farming family businesses and they have to pay inheritance tax.
asmeile@reddit
they werent saying anything about tax though, they were saying why someone might not want to sell up
susususero@reddit
Yes that's true. And I do feel empathy that farmland being a tax loophole has made it a massive asset that becomes a burden on farming families.
GammaPhonic@reddit
I know nothing about farming or farmers. But I never see farmers struggling. They all drive luxury 4x4s without a spec of dirt on them.
Where are all these dirty poor farmers struggling to make ends meet?
aldursys@reddit
Land has become like Van Gogh paintings and Jaguar E-types. Its investment value as a store of wealth is now more important than its use value.
Precisely the same problem we have with domestic housing.
Unfortunately the British, particularly the English, have always been obsessed with land and titles. It's a cultural norm that goes back centuries.
shialebeefe@reddit
They should just make the tax payable upon sale or rent of the land
No_Coyote_557@reddit
People like Clarkson buying land to avoid IHT have driven up the price.
WeaponisedTism@reddit
buying a very large chunk of land/property is a good way to clean money.
you buy it through a bunch of shell corps registered out in somewhere where they dont give a fuck where your money came from buy something worth 15 mil keep hold of it ffor a few years sell it for 20 and suddenly all that moneys clean
dwair@reddit
All land in the UK is overvalued. Farmland just follows the trend. the average price of farm land in the UK is £11,300 per acre
If you wanted to do something profitable with it, you need to build houses on 1/8th or 1/10th of an acre each. Then you can sell those plots for £200k or more each.
MobileSquirrel1488@reddit
What do you feed the people in the houses?
WarSlow2109@reddit
Is farmland now going to be gobbled up by massive companies like in USA?
MobileSquirrel1488@reddit
Yes, if we let it.
FatBloke4@reddit
Carbon credits for corporations, future development for housing, solar farms. There has also been a trend for family farms (whether owned or rented) to be borged by corporate farming companies.
Farmers who inherited their farm from their parents tend to have a strong attachment to the land and the life of farming.
What surprises me in all this is how little money this tax change will raise and that everyone seems to have forgotten how it was difficult to get food from abroad during the chaos of COVID. At the time, there was a lot of talk about food security but in a few years, it's all been forgotten.
Betrayedunicorn@reddit
Why are houses so valuable? When you visit one you don’t check the build materials against market rate, you pop and I go ‘nice’ or ‘no’. It’s something like land that isn’t the sum of its parts, but is priced completely by market rate and what people are willing to pay.
Bonny_bouche@reddit
Inheritance tax shouldn't exist. Not on farms, not on anything. It's just theft, supported by spiteful communists.
durtibrizzle@reddit
Firstly farming is profitable. Farmers are very good at paying finance costs instead of tax!
Secondly, the iht loophole meant people that aren’t really farmers have bought farmland.
KRossKoWolf@reddit
Land values are the only answer I can truly give. Simple as that, land is worth money, especially if it is land you know you can/could build property on.
Most farmers I know actually run with a high line of credit/debt now, and it's the land that brings the value. As an example I have a family member who has a farm and the most valuable thing they have is the actual land, not the livestock, and certainly not the profit, if any, they make from what they produce.
When you own at least £10 million in land assets but have debts equal to at least half that value, it can become a vicious cycle of essentially paying debt in perpetuity by either trying to produce goods, selling land for a profit, or actually building out other avenues of revenue.
Most land is no longer used for actual farming purposes anymore, due to years of investment not to actually produce using that land, but instead cultivate it for other purposes, so it essentially becomes dead money, sitting there waiting to be exploited. But that dead money is mostly tied to debt in my experience and trying to actually get to the point of it making a profit is extremely difficult.
But again I am just going by what I have seen/heard from members of my family and the local farming community in my area. I will gladly accept this may be a minority position, but it is what I have seen very obviously in the area and circles in which I am involved.
irishshogun@reddit
It’s all about big corporates buying up medium sized farms. Give it a generation and will be corporates only with small hobby farms the only ones left privately owner outside the royals.
The_Demosthenes_1@reddit
Bro.
In America a farm can be thousands of acres. That's like a small city and the land can be worth many millions of dollars.
Do you think an operation with $20,000,000.00 in assets is grossing $42,000/year. No. They make millions but perhaps make less millions than they think they should and sometimes a Moses plague comes through and they lose money some years.
But this is not a minimum wage operation. Farmers are not starving to death.
Tiny_Megalodon6368@reddit
Land is both finite and eternal. The amount of land is fixed and it's there forever, unless it's land that's falling into the sea.
Fucker_Of_Destiny@reddit
You can’t make more of it
The value of gbp has dropped 40% since pre COVID
The land isn’t worth much more it’s just been repriced due to inflation.
spampoo@reddit
Why is gold so valuable but taking artistic pictures of gold to sell not as profitable?
cokendsmile@reddit
From my understanding,
Firstly the farming industry in the UK is not profitable compared to other countries.
Due to inheritance tax kicking in, the people receiving the inheritance won’t be able to pay the tax and will have no other choice apart from selling it to someone (developers most likely).
The developers will turn the farm land into 1000s of flats and turn it into social housing for the people in need. This will solve the housing crisis but we’ll eventually lose out on all of our farm lands.
The whole of the UK will eventually turn from lush green to a concrete jungle.
notThaTblondie@reddit
Land prices being inflated by big businesses using it as a tax dodge. Misguided rewilding and carbon neutral schemes are buying and using up good land. Air line buys up a few hundred acres of productive farm land that's already sequestering carbon, digs it up, plants trees that won't mature for a long time, doesn't change a single thing about how they actually operate but suddenly they're carbon offset and looking super eco.. And housing. Then the kit that is needed to actually farm the land costs a lot of money, everything is getting more expensive, seasons are getting harder and less predictable, the general public wants cheap food which drives intensification but then vilify farmers for becoming intensive. There used to be subsidy which people see as the farmers getting a handout but really it was subsidising cheeper food. That's stopped or stopping, most stuff now is paying you to do anything but grow food. There's a lot of stuff that's been harming farmers for a long time and this is the Straw that broke the camels back. Unfortunately the general public has been largely oblivious to the recent struggles in farming so all they've seen is a load of land owning Tories having a fit because someone told them to pay tax like everyone else. That's not the reality but it's sure how it looks and it's not a good look.
THX39652@reddit
Value of the land. Also there’s a simple way to avoid it. Put the farm in trust with the next of kin as beneficiaries
Corrie7686@reddit
Who says farms aren't profitable?
Of course they are, only an idiot thinks a well run farm isn't profitable, Jeremy Clarkson's farm TV show isn't real. Margins are tight, bad harvests can make a difference to profits, as can interest rates and global prices. But farming IS profitable.
Agricultural Property Relief aka the alleged tax loophole only applies to land used for Agricultural use. So the whole "build houses on it, solar farms' thing makes that land subject to IHT. Sale of the land for those uses triggers CGT.
There aren't as many loop holes as people think.
SillyZubat@reddit
I don’t know much about tax but I did grow up on a farm. It was on a hundred year lease to the family from the local lord, I assume a rolling lease at we’d had it for many generations. The land was gifted to the lord by a king for their help in a war, I forget which one. I believe, as another commenter said, it’s in a sort of trust state, even if the current lord wanted to sell up I’m not sure that he could exactly.
Our farm was 200 acres, arable with a small dairy herd. My dad was adamant that he didn’t want me or sibling to go into farming because there was no money in it. He was right, in this day and age a traditional farm can’t make any money, it needs to be more of an industrial factory, hundreds of cows, thousands of acres.
DEFRA continues to impose more and more rules and regulations on farming, making it difficult to keep up. One arbitrary regulation forgotten with planting, harvesting or storage and your crop can’t be sold for human consumption. Food from abroad became cheaper and easier for supermarkets to source. I know the milk tanker stopped coming sometime when I was small because we didn’t produce enough milk for them to bother.
There’s also A LOT of rules when it comes to what farmland can be used for as well. I know preservation of the green belt is a pretty big one but I’m sure there are others. You couldn’t just buy farmland and build a supermarket, farmland for the most part stays farmland, so you’d just be selling it to a more successful neighbouring farmer.
BadPallet@reddit
A farm can be super valuable, even if farming itself doesn’t rake in the cash, because the land alone is worth a ton. Land is scarce, and its value usually goes up over time—especially if there’s a chance it could be used for housing or other developments later on. Plus, owning farmland gets you government subsidies, tax breaks, and payments for things like eco-projects or rewilding, so there’s money to be made outside of traditional farming.
Locust-15@reddit
This short 2min documentary should explain it
McDeathUK@reddit
Land I would have though, and old orginal buildings
neb12345@reddit
because land has become a tradable asset, like gold its value is no longer linked to its use.
land does have the benefit that if well managed it will maintain a small profit for eons to come.
on why do farmers own land greater than they can afford to be taxed? because maintaining the small anual profit of the family farm although technically infinite doesn’t provide much year to year
Timely_Egg_6827@reddit
Scarce commodity. If planning permission relaxed and have been by successive government, the value skyrockets but even without land banking makes a sensible gamble. There are wildlife subsidies if you don't farm it. Farmers do diversify but if they do too much, then it ceases to be a farm and different tax laws apply.
theModge@reddit
That's big one, especially in the south, land has value because it might get planning permission to become houses and in the UK system the current owner takes a massive profit on that.
Somewhere (Europe, I forget where, possibly France?) has a system whereby when planning permission is issued the land is sold for what it would be worth as farm land, but that obviously requires the state to come in and dictate land values.
Scarity and use as a tax dodge are both very pertinent points, but in some places this plays a big part too
gamecatuk@reddit
Farmer just needs to be a ltd company IHT can't touch it.
Big-Trust9663@reddit
No, but you'll be taxed IHT on the shares. Plus, operationally you'll be taxed corporation tax on your profits, plus income tax on the dividends.
gamecatuk@reddit
Nope your not taxed on the shares you can get 100% business relief as it's your own going concern. Your taxed corp tax on your dividends from profit. It's similar to income tax so you wouldn't notice it.
Farmers are complaining about nothing.
It's just rich landowners that are really effected.
Big-Trust9663@reddit
Can you claim business relief if you're eligible for agricultural relief? If so then this row about nothing really is about less than nothing.
Don't get me wrong I've got no problem with 'farmers' paying inheritance tax, just didn't know they'd be treated even nicer if they incorporated.
gamecatuk@reddit
Anyone can create a ltd company and then pass down going concerns tax free. That includes farms. You only need agricultural relief if the farm is in your personal name. Many farms are ltd companies anyhow.
sgwennog@reddit
subsidies, lifestyle, virtually all your costs are tax deductible (including your house!).
A farmer on £25k a year lives a lifestyle not unlike a salaried person on £125k+. That said, the people I know in that community (not necessarily "landowners" of farms) do work long hours with few holidays (but that's because they prefer to spend time with their horses than time abroad). It's more of a lifestyle choice than anything else. To get into that lifestyle requires serious spondulix.
Other_Bookkeeper_279@reddit
The uk farmers usually produce food at below cost price, the only reason they are still in business is 1 in every 5 years you have great yields or a great price to pay for the losses of the other years, most farming businesses are propped up by diversifying the business and subsidies. The subsidy is less and less each year With the new pickup tax Fert tax National insurance rise Minimum wage rise IHT on land This will be the death of uk farming unless world food prices rise significantly
Get ready for imported food at whatever price they decide People don’t realise how lucky we are having fresh quality food on the your doorstep grown in your parish as cheap as it is
Scav_Construction@reddit
The current government gas made ridiculous commitments about how many houses they will build- this happens every government but particularly outlandish this time. They want to take land we need for food to accomplish this- land is not really available that often.
Farms can't just sell a bit or buy a bit randomly- they want land around their farm obviously. You might be talking parcels of land changing hands between two or three adjoining farms- it is not that common. Farmers are notoriously attached to having as much land as possible and rightly so- size is money.
We are seeing a strategic attack on the UK's food supply both through pricing, taxes, building over prime agricultural land and actually paying farmers NOT to grow anything. Read that again, farmers are getting grants of £450 an acre to NOT grow food.
Elster-@reddit
Farming land is valuable to those who can afford to buy it.
Farmers can’t afford to buy it, as it’s being bought by seriously rich people and companies like BlackRock. As land banks
A £3m farm is a small farm anything less is a hobby farm. Often making less than £50k, that’s not profit. It’s one of the least profitable industries with most earning a lot less than minimum wage.
What asset managers will do with their massive land banks is yet to be seen, but at that point they control food pricing.
quoole@reddit
Are you asking if land and property is valuable?
It can absolutely be used for things beyond farming
Cubeazoid@reddit
The question is why is land so valuable in general. It’s not just farms, just look at house prices over the last 30 years. Inflation has pushed up the nominal value, increasing demand has pushed up the real value. Why has the demand for land gone up? More people in the country and an increasingly free global market.
hallerz87@reddit
The land has intrinsic value. If you get planning permission to build houses, the value will shoot up. Therefore, the value of the land isn’t a direct function of its ability to generate revenue today. There are also other factors that drive its value. This is true of other assets eg a patent. The underlying technology may be several years from commercialisation but the patent still has value despite no cash flow.
Salahs_barber@reddit
Clarkson bought a farm to avoid tax, he even said it in his show how are we going to be able to make money? All the moneys in land, most farmer rent the land and are tenant farmers, they are basically tied to the land. Notice how it's the rich who are complaining and telling farmers join us it's you as well, even though the poor farmer doesn't own the land they farm.
Big_Poppa_T@reddit
Land costs money. What kind of question is that?
MrAlf0nse@reddit
Owning land is profitable Farming is not. A lot of the “farmers” don’t get their wellies muddy, but rent the land out to people who do farm
The inheritance changes kind of affect this racket. Unfortunately it has potential to screw over real farmers too
Do_not_use_after@reddit
Can you run multiple 4x4s, keep horses and live in a large, detached house in the country. What makes you think that being a farmer isn't profitable. Farms are subsidized to an enormous extent, so while farming may not be profitable, being a farmer is just fine.
uk451@reddit
The only farmers that are doing fine are the ones hosting Airbnb guests. They’re essentially in hospitality; which is shit:
Square_Sink_4090@reddit
Wow spoken like a true reddit warrior without a clue
Do_not_use_after@reddit
I've yet to meet a farmer with any integrity or much understanding of soil fertility, land management or even the basics of what conditions are needed to make things grow. Farming seems to have fallen under the spell of fertilizer companies and seed sellers, and lost all knowledge of the job. The sooner they're run like a business and less like a feudal fiefdom the better.
OldManChino@reddit
Only farmers who make money these days are diversified. People can go on about labour killing farming, but farming has been dead for a long time
Source. Grew up on a dairy farm.
TheGoober87@reddit
Oof this is so wrong.
Farms subsidies have been absolutely slashed over the years, there's fuck all money in it. You only need one bad year of weather (of which there is plenty now) and suddenly you have no or little income.
Of course you do get the people who have inherited farms and have lots of money from elsewhere, but I guarantee their main source of income isn't farming.
ByteSizedGenius@reddit
Most farmers I know who are doing well right now aren't doing so because of actually farming. It's diversification income streams.
blacksmithMael@reddit
Pains me to admit it, but you’re right. We earn far more from our wedding venue, campsite, farm shop, cafe, shoot, and other ancillary ventures than any form of actual farming.
Without subsidies farming would be borderline unviable, especially considering time cost and risk. It is effectively a pretty backdrop to the profitable stuff at the moment.
Illustrious-Log-3142@reddit
This is why there's an increase in farm shops, pumpkin patches and any activity which makes money from the land! I live down the road from one and I don't mind when it's super busy because I know it keeps alot of people in a job and it is a brilliant farm shop for the community.
DebraUknew@reddit
Land…
External-Piccolo-626@reddit
So the saying goes, have you ever seen a poor farmer?
pikantnasuka@reddit
The weirdness in the way we assign monetary value
Land is only really valuable for what it produces, in this context food which is one of the most essential things imaginable, and yet we value the land itself far more highly than the vital produce grown from it
The land is said to be worth a huge amount of money; the farmer uses that land to grow food but is only paid a small amount of money for it. The farmer has no cash. But they own what is deemed a very valuable asset
It really makes me think about something which became so clear during the pandemic. The jobs that could not be paused were the low paid ones without status, because they were the ones essential for things not to fall apart entirely. But they remain the low paid ones without status, just as the food and the work of getting it remain lower valued than the land it is produced on
tandemxylophone@reddit
Some lands are only permitted to do certain types of business due NIBYism and other urban sprawl rules. This isn't limited to farming, say a bookstore in a listed building may have difficulty converting to a fast food store due to all the extra regulations it needs to adhere to. Councils try to manage businesses by asking for less fees from bookstores compared to dentistry, so we don't get lanes full of identical vaping stores and fast foods.
Farm lands have similar provisions. The land itself may not be that profitable as a business, but with subsidiaries it works out. As a country, we need some form of money circulation into making are own food. Now, a lot of people realised due to the value of non-farm land, it's possible to make a loophole in inheritance tax to pass on land asset without the need of even a functioning business - i.e. live as landlords using farm lands as a by-product. It's not working as it's originally intended, for farmers to own family land to live as farmers.
non-hyphenated_@reddit
Because at £10,000 to £15,000 per acre it soon adds up
CarpeCyprinidae@reddit
Land banking. Farmers can afford to stash land they are under using because the cost of doing so, over generations, is negligible
Playful-Net4958@reddit
Because you don't pay the proper rate of inheritance tax on it.
wyzo94@reddit
The UK government through loads of money at forestry and peat ground which was bought up by big corporations for carbon credits.
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