MPs call on government to delay changes to inheritance tax

A cross-party group of MPs has urged the Government to delay its changes to inheritance tax (IHT), backing the CLA’s calls to consult and consider alternatives.

A report by the Environment, Food and Rural Affairs Committee (EFRA) calls on the Government to delay announcing its final agricultural property relief (APR) and business property relief (BPR) reforms until October 2026, to come into effect in April 2027.

It argues a pause in the implementation of the changes “would allow for better formulation of tax policy and provide the Government with an opportunity to convey a positive long-term vision for farming”. It would also protect vulnerable farmers who would have more time to plan, the report adds.

Country Land and Business Association (CLA) President Victoria Vyvyan said:

“The government has dug itself into a deep hole by targeting family farms and businesses, and must now pause, listen and consult.

“The ‘clawback’ alternative that the CLA and other stakeholders propose could limit the damage to businesses. It would allow rural and other family businesses to continue to make medium and long-term investment decisions, unlocking the stalled growth in business investment in the rural economy and keeping land in production.

“This plan would also target those who have bought land to shelter wealth for short-term gain, and will still deliver revenue that the Treasury needs.

“The CLA will not give up, we will carry on campaigning against the current disastrous policy, and the government has to work with us and commit to finding a solution.”

It is notable that this is the first report from the committee, and that it has come out so strongly on the policy direction shown so far by this Labour Government.

The recommendations focus not only on the decisions taken on IHT but also the sudden closure of the Sustainable Farming Initiative (SFI) 24, and the capital grants scheme that also came to a sudden halt last November.

While the committee recognise that the new government has to set its policy direction, it observed that many of the decisions have come across as rushed, unfinished and announced without the accompanying policy development. The committee says that this has destabilised trust with the farming community, as not only are they unable to plan for future decisions but they haven’t been shown the rationale behind the changes.

The committee states that Defra must prioritise the 25-year Farming Roadmap to provide some clarity and certainty to farming businesses. Alongside this there is praise for the creation of the Batters Review (led by former NFU president Minette Batters) that will examine farm productivity and profitability. The CLA is feeding into the review.

The committee goes further when reflecting on the changes to IHT, critcising the government for failing to publish any impact assessment or affordability reviews ahead of announcing what would have always been a controversial policy. Its main recommendation to delay any changes until 2027 would allow all other options, such as the “clawback mechanism” to be considered and consulted upon. It suggests that relations between the farming community and the government would improve if everyone shared an agreed set of data.

This delay until 2027 also would allow farm businesses the opportunity to estate plan and reduce some of the pressure that is currently being felt across rural areas.

The CLA and other industry bodies presented the clawback option to the Treasury in February, after the Chancellor invited alternative ways to raise revenue.

From April 2026 the government is to cap vital inheritance tax reliefs for farms and family businesses. The clawback mechanism proposed retaining 100% agricultural and business property reliefs (APR and BPR), but inheritance tax would be applied to assets if sold within a certain time period post-death, payable out of the proceeds of sale. It would mean those who continue to farm would not be hit with crippling tax bills, and those who decide to sell would have the cash in the bank and be able to pay.

The CLA expects this could generate a similar figure to what the government claims its own policy would achieve, and has called on the Government to ask the Office for Budget Responsibility to model the proposal.

The CLA has argued that the government’s cap could affect 70,000 UK farms, some as small as 100 acres. It will also have a detrimental impact on farm profitability, with an average 350-acre English arable farm owned by a couple needing to spend 99% of their yearly profit over a decade to afford their inheritance tax bill.

The changes will have a devastating impact on the economy, with CBI Economics recently estimating it will cost over 200,000 jobs during this Parliament and produce a loss of £1.9 billion in revenue for the Treasury.