Politics / Budget concern over agricultural property relief
NORTHERN Isles MP Alistair Carmichael has welcomed the UK Government’s decision not to increase fuel duty – but has expressed concern over changes to inheritance tax relief for farmers.
Labour chancellor Rachel Reeves presented the autumn budget in the House of Commons on Wednesday.
In the first Labour budget in 14 years, there were a number of tax rises – including a 1.2 per cent increase in national insurance contributions for businesses from April.
Reeves pledged more investment for public services, while Scotland stands to receive an extra £3.4 billion through the Barnett formula.
Responding to the budget, Orkney and Shetland’s representative in parliament Alistair Carmichael said the “devil will be in the detail”.
But he commented: “I’m glad that the chancellor listened to Liberal Democrat calls for more investment in the NHS and in infrastructure.
“The Scottish Government now have some major choices if they are going to make the most of this extra funding.
“In the past the SNP have chosen poorly, wasting hundreds of millions on ferries that have not been delivered and tens of millions on a bureaucratic takeover of social care which will probably now never happen.
“Farmers in particular have the right to expect the farm funds that the SNP raided previously to be returned in full.”
The Liberal Democrat welcomed that the freeze on fuel duty will be continued.
But Carmichael, who is the new chair of the UK Parliament’s environment, food and rural affairs committee, said he fears the treasury “does not realise the damage” that a change to inheritance tax relief for farmers could cause.
From April 2026 the first £1 million of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1 million, inheritance tax will apply with 50 per cent relief, at an effective rate of 20 per cent.
“As well as cutting deep into the heart of local family-owned farms, it will deal a huge blow to all those small businesses that depend on them: from vets to agricultural merchants to local shops and post offices,” Carmichael said.
“The people who most immediately at risk are tenant farmers as their landlords look at ways in which inheritance tax might be avoided.
“That is without mentioning the concerning decision to cut farm budgets in real terms, which will have knock-on effects across the UK and goes against the government’s stated aim of building up our food security. Labour may have inherited a legacy of farm budget mismanagement from the Tories, but it is their decision if they double down on the same mistakes.”
The Conservatives’ Highlands and Islands MSP Jamie Halcro Johnston called the budget a “disaster for the Highlands and Islands and for Scotland’s rural communities”.
He added: “The chancellor has claimed she wants to protect ‘small family farms’, but it’s clear Rachel Reeves has absolutely no idea what a small family farm actually looks like or how Labour’s cut to agricultural property relief will impact on rural Scotland.
“This decision demonstrates a fundamental lack of understanding about the challenges facing farming, or of the consequences this new tax burden will have on farming families and on much-needed future investment in the sector.”
Meanwhile the government also confirmed it will increase a windfall tax on North Sea oil and gas producers from 35 per cent to 38 per cent and extend the levy by one year to 2030.
Generally the UK Government said the budget is designed to “fix the foundations to deliver on the promise of change after a decade and a half of stagnation”.
It said the Labour regime was handed a “challenging inheritance – £22 billion of unfunded in-year spending pressures, debt at its highest since the 1960s, unrealistic plans for departmental spending, and stagnating living standards”.
The government added that the budget will help “rebuild Britain by boosting public investment by over £100 billion over the next five years”.
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