MPs call for delay to farm inheritance tax changes

A committee of MPs has called for a year-long delay to the farm inheritance tax reforms.

The cross-party Environment, Food and Rural Affairs (EFRA) Committee said the changes announced in the Autumn Budget 2024 were made without adequate consultation, impact assessment or affordability assessment.

In its report, the EFRA Committee said a delay would give farming businesses more time to carry out succession planning and get appropriate professional advice.

What are the changes to farmers’ inheritance tax?

Agricultural property relief (APR) and business property relief (BPR) are types of inheritance tax (IHT) relief that reduce the amount of tax farmers and landowners must pay when farmland and farm-related business assets, such as machinery and livestock, are inherited.

In the October 2024 Budget, the Government announced reforms to APR and BPR. From April 2026, the highest rate of relief will continue at 100% for the first £1 million of combined business and agricultural assets on top of the existing nil-rate bands. After the first £1 million, farmers and landowners will access 50% relief from inheritance tax and will pay IHT at a reduced effective rate up to 20%, rather than the standard 40%. This tax can be paid in instalments over 10 years, interest-free.

The committee’s view on the APR and BPR reforms

The EFRA Committee said it supported the Government’s aim of reforming APR and BPR to close the loophole that allows wealthy investors to buy agricultural land to avoid inheritance tax.

But it said: “The lack of proper evaluation of the impact of these changes means that the scale and nature of its impact on family farms, land values, tenant farmers, food security and farmers in the devolved administrations is disputed and unclear and comes with a considerable risk of negative unintended consequences. As such, the reforms threaten to affect the most vulnerable, including those who are older or are farming less profitable or tenanted holdings. The real concerns of farmers are demonstrated in recent data on farmer confidence and mental health.”

The committee also pointed out that several alternatives to achieve the same goals – or mitigations to protect vulnerable farmers – had been proposed. It said there was sufficient time between now and the 2026 Finance Bill for the Government to consult on the proposals.

The EFRA Committee’s recommendations

The committee urged the Government to delay announcing its final APR and BPR reforms until October 2026, and for the changes to come into effect in April 2027 instead of April 2026. It said the Government should use this time to consult on its proposed changes, conduct an impact and affordability assessment, and consider policy measures and mitigations to reduce any unintended negative consequences.

The committee said the consultation and assessment must consider the best means to:

1. Prevent APR and BPR being used to avoid inheritance tax while allowing farms to be passed between generations intact.
2. Protect the most vulnerable, including those with less access to financial and legal advice.
3. Prevent negative impacts on tenant farmers.
4. Ensure food security is not threatened but enhanced.
5. Ensure its policies reflect specific challenges or circumstances in the devolved administrations, given variations in farming structures, land prices, economic conditions and legal systems.

EFRA Committee Chairman Alistair Carmichael MP said: “Farmers ought to be the essential element in the Government’s plans both to achieve food security and to restore and protect the environment. When they make decisions for their businesses, farmers have to plan for the long term – but the landscape they are operating in currently is unclear. Farmers urgently need clarity, certainty and advance notice of changes – they cannot be expected to rethink their businesses on a whim.”

My thoughts on the call for a delay to the farmers’ IHT changes

It’s no shock there’s intense lobbying in relation to the proposed changes to APR and BPR, given the highly political nature of the industry. I wouldn’t be surprised if the current plans evolve over the coming months into a more ‘watered down’ version.

In the meantime, it’s worth getting professional advice on how the inheritance tax reforms might impact you.