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Supermarket giants Tesco and Lidl have taken on British farmers, calling on Prime Minister Sir Keir Starmer to pause his inheritance tax reforms or risk the future of the sector.
British farmers have taken to the streets of London in recent months to protest against changes to inheritance tax relief announced in October’s budget, which will end decades of exemptions from death tax.
The reforms mean that from April 2026 landowners will be subject to a 20 per cent tax on farmland above a threshold of between £1.3m and £3m, depending on whether they are married and own a home.
Ashwin Prasad, Tesco’s chief commercial officer, said on Wednesday that the UK’s biggest supermarket “fully understands[s]” a concern expressed by “many smaller holdings” that relied on agricultural property allowances and business property allowances.
“We will support calls by the National Farmers Union for a pause in the implementation of the policy while full consultation takes place,” he added. “This is not just a debate about individual policies – the future of food security in the UK is at stake.”
Lidl said it was “concerned that the recent changes to the IHT regime will affect the confidence of farmers and growers and halt the investment needed to build a resilient, productive and sustainable UK food system”.
Meanwhile the Co-op Dairy Group, a group of milk suppliers, told members in a letter that it had “directly contacted the relevant government departments to express our hope that they will reconsider the impact . . . changes” and said he supported calls to pause the implementation of the policy.
Supermarkets themselves have drawn fire from farmers, with tractors parked at a number of major retailers across the country this month to raise awareness of the impact of the tax changes. On 16 January, supermarket Morrisons was granted an injunction by the High Court to block further protests.
Ahead of October’s budget, farming campaign groups slammed supermarkets for squeezing their margins with low food prices and undercutting them for not supporting local produce.
Earlier Wednesday, the Office for Budget Responsibility released a brief cost accounting of the IHT policy, estimating that it would raise an extra £500m for the Exchequer annually between 2027 and 2029, according to government estimates.
But the fiscal watchdog noted receipts were likely to decline after seven years as farmers increasingly gifted their holdings to children and changed their tax planning strategies.
The OBR also suggested that “some older people would find it more difficult to quickly restructure their businesses” in terms of succession planning to accommodate the new measures.
Victoria Atkins, the Conservative shadow environment secretary, said the government had “decided to destroy British family farming for little return. The OBR is clear that it will be almost impossible for older farmers to quickly restructure their businesses in response to this retaliatory tax.”
Farmers say the sector was struggling with the pressures of climate change, real subsidy cuts, high inflation, thin margins and the prospect of increased competition as the UK hammers out post-Brexit trade deals before Chancellor Rachel Reeves announced the IHT changes.
The exemption was introduced in the 1980s to allow farms to remain in the same family after the death of the owner, a trend that many warned would become much more difficult. However, this helped drive up field prices as wealthy individuals purchased farmland as a form of legal tax avoidance.
Farmers who want to pass on their estates and their spouses are entitled to £1m of relief before they start paying IHT on their land, on top of normal inheritance tax.
With couples already enjoying the £1 million threshold on their estates, this means two spouses would enjoy a threshold closer to £3 million, officials noted.
A government spokesman said: “Our reform of farm and business estate relief will mean estates will pay a reduced effective rate of inheritance tax of 20%, instead of the standard 40%, and payments can be spread over 10 years, interest-free.
“This is a fair and balanced approach, which improves the public services we all rely on, affecting around 500 properties next year.”
