The petition of residents of Northern Ireland,
Declares that the government should uphold the Agricultural Property Relief and Business Property Relief on inheritance tax on farms; notes the petition by the Ulster Farmers’ Union on this topic with over 15,000 signatures; and further notes the disparity between the DEFRA and DAERA statistics on the number of Northern Ireland farms impacted by this change.
The petitioners therefore request that the House of Commons urge the Government take immediate action to stop the removal of the Agricultural Property Relief and Business Property Relief on inheritance tax on farms.
And the petitioners remain, etc.—[Presented by Robin Swann, Official Report, 28 January 2025; Vol. 761, c. 274.]
[P003037]
Observations from the Exchequer Secretary to the Treasury (James Murray):
The Government thank the hon. Member for South Antrim (Robin Swann MP) for submitting the petition on behalf of residents of Northern Ireland regarding the reforms to agricultural property relief and business property relief announced at autumn Budget 2024.
The Government’s commitment to farmers and the vital role they play in feeding our nation remains steadfast. The Government recognise the concerns raised by the farming community, including those in Northern Ireland, and UK Government Ministers have met with the Ulster Farmers’ Union since the Budget to listen to their concerns. The Government are aware of the strength of feeling in Northern Ireland and elsewhere.
It is important to understand why this decision was taken, and what it means in practice. This decision was not taken lightly and, despite a tough fiscal context and contrary to the suggestion in the petition that the reliefs are being removed, the Government will maintain very significant levels of relief from inheritance tax beyond what is available to others.
At autumn Budget 2024, the Government took a number of difficult but necessary decisions on tax, welfare, and spending to restore economic stability, fix the public finances, and support public services. These were tough decisions given the situation we inherited from the previous administration, but the Government have done so in a way that makes the tax system fairer and more sustainable.
In 2021-22—the most recent year for which data is available—the median value of assets qualifying for agricultural property relief was £486,000 and three-quarters of estates claimed for agricultural property below £1 million. The data also shows that a very small number of claimants each year claim a very significant amount of relief— 40% of the total Exchequer cost of the relief went to the top 7% of claims. It is not fair to maintain such a significant relief for a very small number of claimants, when this money could better be used to fund our public services. This data is available at
https://www.gov.uk/government/publications/agricultural-property-relief-and-business-property-relief-reforms
The general inheritance tax rules remain unchanged. If an individual’s estate goes to their surviving spouse or civil partner, it is completely exempt from inheritance tax. When an estate goes to anyone else, there is a £325,000 nil-rate band, which increases to £500,000 where a qualifying residence is left on death to a direct descendant, such as a child. Any unused nil-rate bands are transferred to a surviving spouse or civil partner, which means the qualifying estate of a surviving spouse or civil partner can pass on up to £1 million to a direct descendant without any inheritance tax liability when they pass away.
Agricultural property relief and business property relief are in addition to these general allowances. The reforms announced at autumn Budget 2024, which apply from 6 April 2026, mean the first £1 million of combined agricultural and business assets will not result in any inheritance tax. Above the £1 million allowance, individuals will access 50% relief from inheritance tax and will pay inheritance tax at a reduced effective rate up to 20%, rather than the standard 40%. These tax reliefs can be combined with the general allowances mentioned above, and this means a couple could pass on up to £3 million tax-free between them.
Furthermore, any gifts of assets made more than seven years before death are fully excluded from inheritance tax. Taper relief can also apply in certain circumstances, which reduces the tax payable on gifts made within seven years of death. Where inheritance tax is due, those liable for a charge can in most circumstances pay any liability on the relevant assets over 10 annual instalments, interest-free.
The reforms are expected to result in up to 520 estates across the UK claiming agricultural property relief, including those that also claim business property relief, paying
more inheritance tax in 2026-27. This means almost three-quarters of estates claiming agricultural property relief, including those that also claim for business property relief, would not pay any more tax as a result of the changes in 2026-27, based on the latest available data. More detail on the Government’s estimates are available in a letter from the Chancellor of the Exchequer to the Chair of the Treasury Select Committee in November 2024, which is available at
https://committees.parliament.uk/publications/45691/documents/226235/default/
The Government are aware of the analysis undertaken by the Department of Agriculture, Environment and Rural Affairs in relation to the potential impacts in Northern Ireland of the reforms to these reliefs. However, the Government remain firmly of the view that claims data is the correct way to understand an inheritance tax liability. The Government’s analysis of the number of estates across the UK expected to be affected by reforms
is underpinned by that data. The Government were also asked recently to respond to several questions from the Northern Ireland Select Committee about these reforms, including in relation to DAERA’s analysis. The response to the Committee can be found at
https://committees.parliament.uk/publications/46267/documents/232537/default/
In summary, the Government understand the concerns raised in the petition, but believe our approach gets the balance right between supporting farms and fixing the public finances in a fair way. The reforms reduce the inheritance tax advantages available to owners of agricultural and business assets, but still mean those assets will be taxed at a much lower effective rate than most other assets. Despite a tough fiscal context, the Government will maintain very significant levels of relief from inheritance tax beyond what is available to others and compared with the position before 1992.