How Trump ‘eliminated' inheritance tax for farmers – while Starmer ramped it up

Telegraph

29-07-2025

When Donald Trump generously interrupted his golfing holiday for a meeting with Sir Keir Starmer earlier this week, he did not shy away from sharing a few home truths with the Prime Minister.
In between calling Sadiq Khan 'nasty', telling Sir Keir to cut taxes to beat Nigel Farage and expressing his view that 'wind [power] is a disaster', the American president raised the spectre of inheritance taxes, on farmland in particular.
While Trump has, in effect, eliminated inheritance tax (IHT) for all but the most expensive estates in the US, Sir Keir has gone the other way, moving to remove relief on IHT for agricultural land.
During the meeting at Turnberry, Trump's golf course south-west of Glasgow, the president stopped short of explicitly criticising Sir Keir's policies, but he noted that farmers in the US had been driven to suicide by the previous tax regime and that he had taken steps to cut inheritance tax in both of his presidencies.
'We ended the estate tax,' he said, citing a federal tax which is levied on the transfer of an estate of a person who has died. 'There's no estate tax on farmers, so when a parent leaves their farm – because a lot of these farms, they don't make a lot of money, but it's a way of life and they love that way of life.'
Trump's Tax Cuts and Jobs Act 2017 during his first term raised the individual exemption for estate tax – not just on farms – to $11m (£8.2m), and double that for a married couple, both linked to inflation. (Beyond the threshold, assets are taxed at a rate that rises to 40 per cent.) Speaking in North Dakota in 2017, Trump said he would 'protect small businesses and family farmers' by ending the estate tax, which was a 'tremendous burden' for the family farmer. Critics argued it was a gift to the super rich, which would scarcely benefit the people Trump claimed to be helping.
'The estate tax tends to draw out intense feelings, even as it's a relatively small tax provision,' says Alan Cole, a senior economist at the Tax Foundation, a non-partisan think tank based in Washington, DC. 'Surprisingly, a lot of people feel it's unfair. They know they are not going to pay it, but they think once you've paid income tax on something, the government shouldn't be involved. Then some people think inheritance is unfair.'
Trump's policy has meant that more than 99 per cent of estates escape inheritance tax. President Joe Biden had repeatedly urged Congress to restore the previous limit of $3.5m (£2.6m), but nothing was passed. Trump's 'Big Beautiful Bill', which passed earlier this month, will increase the thresholds again, to $15m (£11.2m) and $30m (£22.5) from 2026.
Some have sought to go farther still. In February, US Senate majority leader John Thune introduced the Death Tax Repeal Act – legislation aimed at repealing taxation altogether on the transfer of property when someone dies. Farming unions and politicians keen to court the rural vote are in favour of the move, claiming the tax is a 'boot on the neck farming families' which threatens the continuation of family farming in the country.
Cole says that whatever the rights and wrongs of death duties, the prevailing political wind has been against them. 'When Democrats have tried to push back, they haven't been able to assemble a majority, where Republicans have been able to get everyone on board for expanding the estate tax exemption. It looks like Republicans have won on this issue over the last 10 years,' he says.
The same cannot be said in the UK, which is going in emphatically the other direction on death duties for agricultural estates. Sir Keir's policy, announced in Chancellor Rachel Reeves's October budget, will introduce an effective inheritance tax of 20 per cent on farm and business assets above £1m.
It has provoked fury among farmers, even as the Treasury has claimed 75 per cent of farm estates will remain unaffected. More than 20,000 people protested against the proposals in Whitehall last November, with television star Jeremy Clarkson – who appears in the Prime Video documentary series Clarkson's Farm – saying the proposals would be 'the end' for farmers. But Sir Keir and Reeves have stuck to their guns, despite counter-arguments that for all its divisive effects, the tax would not raise much money. In a BBC interview at the time of the protests, Reeves said: 'I don't think that it is affordable to carry on with a relief like that when our public services are under so much pressure.'
One would expect Trump, a Republican, and Sir Keir, the leader of the Labour Party, to disagree ideologically on inheritance tax.
But the difference of views Trump alluded to at Turnberry also reflects the different political power of farming in the two countries. In the US, 1 per cent of all employment is in farming, versus around 0.8 per cent in the UK. Farming is 0.9 per cent of total US GDP, 0.6 per cent of British GDP. And while the UK has the National Farmers' Union (NFU), the US has several strong lobbying groups, including the Farm Bureau, as well as groups representing specific commodity interests.
What's more, the US political system disproportionately skews towards rural voters. Every state gets two senators regardless of population, meaning sparsely populated, agriculture-heavy states such as Wyoming and North Dakota carry the same legislative weight as California or New York.
Before Trump's One Big Beautiful Bill passed, Randy Feenstra, a Republican representative in Iowa, echoed the president's appeal to farmers.
'Thank you to President Trump for noting that the 'One Big Beautiful Bill' will virtually eliminate the death tax!' he wrote on social media. 'This is an unfair double tax on our family farms and small businesses. By delivering additional relief from the death tax, we are investing in our rural communities.'
Although farmers may not make up a large percentage of the total population by pure numbers, they can have an emotive effect in elections. Rural voters who are not farmers themselves are likely to be swayed by farming interests. Farmers do not have the same leverage in the UK.
'While the farming environment in the US and UK are very different, farmers in both countries are land-rich but cash-poor, and the president was right to point that out,' says Tom Bradshaw, the president of the NFU.
'The US recognised that such a tax wasn't conducive to running family businesses and producing food, and that it was having a detrimental impact on farmers' well-being. As is right in that situation, it took action to rectify the policy,' he adds.
Meanwhile, in Britain, Labour's approach has resulted in a record number of farms (6,365) being forced to close for good in the past 12 months. The majority of the closures took place during the first six months of this year.
Despite the fallout, Bradshaw says that British farmers are not seeking to avoid inheritance tax altogether.
'While we are not asking the UK Government to completely abolish inheritance tax, we are asking them for some introspection. Because the current policy fails to achieve the Government's stated intentions of closing a loophole and protecting family farms,' he says.
Instead, the NFU has proposed a 'claw-back' method of applying IHT, in which the tax would be applied to assets disposed of only within a seven-year period after death. This would mean the tax is paid only when the finance is available to do so, and not if the farm is kept in the family.
'[The method] allows the Treasury to raise revenues without tearing apart farming families, and removes the extreme mental toll this is placing on some members of our community,' Bradshaw says.
Labour cultivated – and won – a surprising number of rural votes in the general election last year. Since then, however, it has shown little sign of wanting to consolidate those swings. As well as the farm tax, it has announced plans to increase solar farms, cut Defra's budget in real terms and increase taxes on double-cab pick-up trucks, often used by farmers. A poll of rural voters last December found that 66 per cent of voters think Labour neither understands nor respects rural communities.
'We aren't going away,' said Victoria Vyvyan, the president of the Country Land and Business Association, writing in The Telegraph. 'We aren't a problem to be managed or a narrative to be changed. We are an entire community under attack, and we will not allow [Sir Keir] to reset this Government's reputation until he resets its relationship with rural Britain.'
The Labour government led by Tony Blair was also strained by its relationship with rural communities, over foot and mouth and Countryside Alliance protests about the fox-hunting ban. In Blair's memoir, A Journey, he wrote that the fox-hunting ban was 'one of the domestic legislative measures I most regret' and that he had been 'ignorant' of the strength of feeling in the countryside. Labour's present policies suggest it has chosen not to take their most successful leader's lessons on board, and that a fight with the countryside is one it is willing to pick.
To judge by the conversation in Turnberry on Monday, on the other hand, Trump understands only too well the power that farmers – and death duties – can have: emotionally, economically and electorally.