Inheritance tax change for farms may be Reeves' 'pasty tax'

Rachel Reeves will end up reversing her decision to charge more inheritance tax on farms, Ruth Davidson has predicted.

Speaking on Sky News' Electoral Dysfunction podcast, the former Tory Scottish leader compared the move in the budget to George Osborne's infamous "pasty tax" U-turn.

Discussing yesterday's budget, Ms Davidson said she doesn't believe the chancellor's financial plan is an omnishambles, but of all the measures, she believes inheritance tax on farms is likely to be reversed.

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The reform on inheritance tax means from April 2026, the £1m of combined business and agricultural assets will continue to not be taxed.

But for assets over £1m, inheritance tax will apply with 50% relief (at an effective rate of 20%).

Ms Davidson said: "A million sounds like a lot.

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"But if you've got a couple of farm buildings, sheds, machinery sheds, some land, like almost all family farms, even small family farms, are above that threshold.

"It's a massive whacking great cash tax bill you have to give the government if you pass on your farm to your kids and they have to find, and the thing about farmers is they might be land rich, but they're pretty much cash poor because farming is not massively profitable."

The Scottish politician pointed to the outcry from farmers on social media, who, she said, are posting "heartbreaking" 30-second videos from their tractors.

"The thing is that losing a farm is not like losing another business," she added.

"It can't come back, and the reason I know that is because that line is the exact line that Keir Starmer gave to the NFU conference last year."

Celebrity farmer Jeremy Clarkson - whose Amazon Prime Clarkson's Farm documents his forays into the world of farming - was another of those who reacted to the tax hike on X.

He wrote: "Farmers. I know that you have been shafted today. But please don't despair."

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While Location, Location, Location presenter Kirstie Allsopp added: "Rachel Reeves had f****d all farmers, she has destroyed their ability to pass farms on to their children, and broken the future of all our great estates, it is an appalling decision which shows the government has ZERO understanding of what matters to rural voters."

The "pasty tax" refers to a proposal by Mr Osbourne in the March budget of 2012 which aimed to make hot takeaway snacks subject to 20% VAT.

The tax caused outrage among bakers at the time, and even led to pasty makers protesting outside Downing Street to deliver a petition opposing the controversial tax.