Cross-party calls for Government to delay inheritance tax change
The Commons Environment, Food and Rural Affairs Committee (Efra), which includes seven Labour MPs, said the Government had failed to properly consult on the policy, leaving its potential impact 'disputed and unclear'.
From April 2026, a 20% inheritance tax rate will be levied on agricultural assets worth more than £1 million, which were previously exempt. This is half the usual rate of 40%.
In a report published on Friday, Efra called on the Government to push back announcing its final agricultural property relief (APR) and business property relief (BPR) reforms until October 2026, to come into effect in April 2027.
The group of MPs suggested that doing so would 'allow for better formulation of tax policy' and protect 'vulnerable farmers' who would have more time to seek professional advice.
It criticised the Department for Environment, Food and Rural Affairs (Defra) for 'poor communication and last-minute decision-making following rumours and departmental leaks'.
'We are concerned however, that no consultation, impact assessment or affordability assessment was conducted before the announcement of the reforms,' the committee said in its conclusions.
'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 committee backed the Government's aim of overhauling APR and BPR to 'close the loophole' allowing wealthy investors to buy agricultural land to avoid inheritance tax, but said stakeholders and experts have proposed several alternative ways to reform these taxes.
These include increasing the tax-free combined cap for both taxes to £20 million but with potential 'clawback period' in which any land sold after being passed on, tapering to avoid a cliff-edge if the property is sold.
The Country Land and Business Association (CLA) has said this option could limit the damage to businesses and allow rural and other family firms to continue to make medium and long-term investment decisions.
Efra also questioned the 'sudden' closing of the sustainable farming incentive (SFI), a green funding scheme for agricultural for farmers, which it said 'affected trust in Government'.
The Government has since announced it will allow SFI applications that were in progress within two months of March 11 to progress with restrictions.
Efra called for an alternative funding mechanism to be put in place no later than September 2025.
Committee members include Lib Dem MPs Mr Carmichael and Sarah Dyke, Tory MPs Charlie Dewhirst and Sarah Bool, and Labour MPs Helena Dollimore, Jayne Kirkham, Andrew Pakes, Tim Roca, Henry Tufnell, Josh Newbury and Jenny Riddell-Carpenter.
Efra chairman ad Liberal Democrat MP Alistair Carmichael said: 'The Committee has taken its work extremely seriously in developing this report and in agreeing our findings.
'There is an opportunity here to rebuild trust and confidence in the farming sector and I hope that the Government will take our recommendations seriously.
'The way in which the Government has behaved over recent months has clearly negatively affected the confidence and wellbeing of farmers.'
He added that the Government appeared to be 'dismissing farmers' concerns' and ignoring the strength of feeling in the sector, despite a series of large-scale tractor protests outside the Houses of Parliament.
'We have seen that Defra's communications with farmers have been poor, with confusing and sometimes contradictory messaging,' Mr Carmichael 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… (they) urgently need clarity, certainty and advance notice of changes – they cannot be expected to rethink their businesses on a whim.
'It is essential that Defra focuses on rebuilding trust through good-faith communications with the sector.'
The Government has been contacted for comment.
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