Tesco backs farmers in ongoing inheritance tax row as it warns Britain's food security is at risk

22 January 2025, 20:04 | Updated: 22 January 2025, 20:19

Tesco is the latest supermarket giant to hit out at Chancellor Rachel Reeves over the farm tax.

The supermarket giant called for Ms Reeves to rethink the introduction of inheritance tax on farms worth more than £1 million to safeguard British agriculture.

Lidl and Co-Op also spoke up about the policy on Wednesday, calling for it to be paused.

The three supermarkets represent around 45 per cent of the British grocery market.

It comes as the Chancellor is attending the World Economic Forum in Davos in a bid to woo business investment to the UK.

Tesco's chief commercial officer, Ashwin Prasad, said in a blog post: "This is not just a debate about individual policies – the UK’s future food security is at stake."

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He went on to say that Tesco "fully understood" concern from farmers, adding that they "desperately need more certainty".

"After years of policy change, it has been harder than ever for them to plan ahead or to invest in their farms," Mr Prasad said.

"It’s why we’ll be supporting the National Farmers Union’s calls for a pause in the implementation of the policy, while a full consultation is carried out."

Meanwhile, Lidl said it was "concerned that the recent changes to the Inheritance Tax (IHT) regime will impact farmer and grower confidence and hold back the investment needed to build a resilient, productive and sustainable British food system."

Sainsbury's, Asda and Morrisons have also backed farmers over the planned tax raid.

They previously called for ministers to "listen to the concerns of farmers about the tax changes".

In the October Budget, Ms Reeves announced that the 100% relief for family farms would be limited to only the first £1 million of combined agricultural and business property.

For anything above that, landowners will pay a 20% tax rate, rather than the standard 40% rate of inheritance tax (IHT) applied to other land and property.

In a further blow to the policy, the Office for Budget Responsibility (OBR) has warned that the amount raised from the tax could drop over time as landowners adapt.

It is due to come in from April 2026, with older farmers expected to be less likely to escape the changes.

"The yield from this measure is not likely to reach a steady state for at least 20 years," the OBR said.

"Any increase in gift-giving will increase attrition and reduce receipts after at least a seven-year period, while the potential proliferation of new tax planning strategies will do likewise.

"Individuals tend to structure their affairs with a view to inheritance planning in their 50s and 60s, which will primarily affect the costing over the longer-term.

"In the medium term, it is likely to be more difficult for some older individuals to quickly restructure their affairs in response to the measure."

President of the National Farmers’ Union Tom Bradshaw said: "It will be older farmers who will be hardest hit by the Government’s misguided family farm tax.

"One minute they were advised to keep their farms until death to pass them on to the next generation, the next they’re left knowing that if they live beyond April 2026 when the measures come in, their children may have to break up or sell the farm. What an appalling position to put elderly people in."

He added: "This policy puts the brakes on investment now and into the future, investment that would guarantee food security for the next decade and beyond, investment that mitigates environmental risk and investment that creates the opportunity for future generations to thrive."