MPs urge Government to reverse ‘devastating’ inheritance tax on farmers

In the Budget, Rachel Reeves announced that inheritance tax will be charged at 20% on farms worth more than £1 million, although the Chancellor has said that in some cases the threshold could in practice be about £3 million.

The move has caused a considerable backlash from farming and countryside communities, and led to a dispute over just how many farms and farm businesses would be affected.

During an urgent question in the Commons, the Conservative MP for Bridlington and The Wolds, Charlie Dewhirst, said farmers in his constituency “categorically do not” support the measures.

He told MPs: “They are shattered by this announcement and the impact on my community will be devastating. Now, can I ask the minister today to do the right thing and withdraw these plans?”

Environment Minister Daniel Zeichner said farmers had told him “they were concerned about the way in which the system was being abused”.

He added: “I’m afraid this is a Budget that stands in its entirety, and the whole country needs stability, so it will stand.”

Conservative former minister Kevin Hollinrake said the move is a “transition from family farms to the state” justified by “warped socialist ideology”.

He told MPs: “The minister talks about a transition, talking to farmers in Bedale on Friday, the only transition they can see is transition from family farms to the state.

“Does he realise that the farming industry is one of the least profitable sectors in the country, return on capital employed 0.5% – that’s the Government’s own figures, that’s around a 20th of the typical profit margin in the UK.

“Other than by some warped socialist ideology, how can he justify taking away 40 years of profits to the typical farm?”

Mr Zeichner replied: “(Mr Hollinrake) may wish to remember the agricultural transition was embarked upon by the then government, a seven-year transition process.

“We’re just over halfway through it, and it’s important that it’s maintained in a stable, sensible way, and that is exactly what we’re doing.

“So my answer to his question is, the challenge that was put to me was maintain stability, don’t tear up those schemes, maintain them, make them work, and that is exactly what we are doing.”

The Environment Minister earlier pledged the Government’s “unwavering” support for farmers and rural communities.

He told the Commons: “Currently, small farms can find themselves facing the same levels of tax bills as much larger farms, despite having a much smaller asset.

“20% of inheritance tax is claimed by the top 2%, 40% is claimed by the top 7%, that’s not fair, it’s not sustainable, and sadly, it’s been used, in some cases by wealthy landowners to avoid inheritance tax, and that’s why this Government has announced plans to reform agricultural property relief.”

Mr Zeichner went on to say: “73% of agricultural property relief claims are less than £1 million, the vast majority of farmers will not be affected, they’ll be able to pass a family farm down to their children, just as previous generations have always done.

“It’s a fair, balanced approach that protects family farms, while also fixing the public services those same families rely on.”

Labour MP Bill Esterson accused the Tories of “defending tax avoidance” in their criticism of the Government’s measures.

The member for Sefton Central told the Commons: “It’s extraordinary that a small number of wealthy landowners have been using agricultural property relief to avoid inheritance tax.

“What is more extraordinary is how the party opposite have defended tax avoidance in the way that they have.”

Mr Zeichner replied: “(Mr Esterson) makes a powerful point. Not only do those people seem to relish finding ways of creatively running their accounts, some of them even, of course, take money to write columns about them as well.”

Shadow rural affairs minister Robbie Moore said farmers “feel completely and utterly betrayed by the measures in this Budget”.

He said: “Does the minister realise that the vast majority of farming families aren’t multi-millionaires?

“Most are cash poor with many struggling to break even, so how does the Secretary of State expect farmers to do more with less? And why is he happy to hand our next generation of farmers an impossible tax bill?

“Next, the Government claims small family farmers will be protected, yet the CLA (Country Land and Business Association) and the NFU (National Farmers’ Union) have today disputed the Government’s figures, so will he commit to release a full assessment of his policy, including an impact on national food security?”

Mr Zeichner replied: “The figures are absolutely there, they were published by the Treasury for all to read.

“They are the facts on these estates that have made claims on agricultural property relief in the last year available. They’re there for everyone to see – it’s not difficult, it’s not complicated, they are there.”