Agricultural Property Relief

Debate between Alistair Carmichael and Ann Davies

Tuesday 28th January 2025 Westminster Hall

[Ann Davies (Caerfyrddin) (PC)]

I beg to move,

That this House has considered the impact of changes to Agricultural Property Relief.

It is a pleasure to serve under your chairmanship, Mr Stringer. I refer Members to my entry in the Register of Members’ Financial Interest as a tenant dairy farmer. In Wales, 80% of our land is given over to farming, and our food foundation sector—including businesses that produce, process, manufacture and wholesale food and drink goods—is a vital part of our economy, hitting a turnover of £9.3 billion in 2023. In fact, Cabinet Ministers in the Labour Welsh Government have lauded Wales as a “food nation”, but the UK Government’s decision in the autumn Budget to change the agricultural property relief and business property relief will have a real effect on food, sustainable food production and food security in Wales.

Business property relief and agricultural property relief were introduced in the 1970s and the 1980s respectively to ensure that a farm or family business could continue trading after the owner’s death, protecting it from being sold and broken up. However, on 30 October 2024, the Chancellor of the Exchequer announced that the Labour UK Government intend to change APR and BPR conditions from 6 April 2026. From that date, 100% relief from inheritance tax will be restricted to the first £1 million of combined agricultural and business property, and 50% thereafter. The proposals equate to landowners paying inheritance tax at a rate of 20% of estate value, with the threshold from which they pay being dependent on individual circumstances. That tax is payable in instalments over 10 years without interest.

Combining APR and BPR under those changes means that the asset value of the tools and the machinery necessary to operate a farming business are affected, as well as the agricultural land and property, alongside any diversification activities that the UK Government have told farmers to explore to increase their income. The UK Government contend that those changes will affect around 500 estates a year, and that small family farms will not be affected, but organisations within the agricultural sector say otherwise.

The National Farmers Union calculated that 75% of commercial family farms will fall above the £1 million threshold across the UK. The Farmers’ Union of Wales, using other figures, estimated that essentially all farms that produce nearly 90% of agricultural output in Wales could be liable under the changes. In fact, Eirian Humphreys of LHP Accountants, a large accountancy firm across south and west Wales, told me that of the 51 farming clients who have inquired about those changes so far, 46—around 90%—will have to pay inheritance tax if they die after 6 April 2026.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I congratulate the hon. Lady on bringing this matter before the House again. On the subject of the 500 estates, can we all agree that that only relates to the number of estates that claim under APR? It does not take account of the effect of APR and BPR together. In fact, BPR valuations are taken at book value, not at market value, so the number of estates that are liable must inevitably be massively greater than 500.

[Ann Davies]

Absolutely. We all know that is the case.

[The Parliamentary Secretary to the Treasury (Torsten Bell)]

indicated dissent.

[Mr Carmichael]

The Minister is shaking his head. I wonder whether the hon. Lady would join me in inviting him to intervene to explain why that fact is wrong.

[Ann Davies]

I do not know whether the Minister would like to do so now or at the end. It is up to him.