Agricultural and Business Property Relief

Angus MacDonald Excerpts

Tuesday 14th January 2025 Westminster Hall

[Graham Stuart]

I had better make some progress. The hon. Member for Penrith and Solway may have been scolded behind closed doors for doing that, but he will have regained the trust of voters who put their trust in him. As devastating as the proposed changes to APR and BPR could be on our farmers, the impact of the changes on family-owned businesses more widely could be even greater, and perhaps that deserves more attention.

A recent report by Adriana Curca at the CBI laid bare the potential fallout. Far from raising £1.4 billion, as forecast by the Treasury, the Chancellor can expect a £1.2 billion decrease in tax revenue from family-owned businesses. Instead of helping the Government to fulfil their pledge to be pro-business and pro-worker, it could lead to the loss of more than 125,000 jobs over the next four years.

Rachel from accounts obviously never got a new abacus for Christmas. Maple Garage, Beverley Travel, Beverley Camera Centre, Oh My Dog—great place—Flowerstyle, Vivienne Rose Wallpaper and Interiors, the Beverley Card Company, Islay Bloom, the Monkey Tree Café, Trent Galleries, Hull Aero Club—those are all businesses that I have spoken to since the Budget. The overwhelming sentiment was exactly the same, regardless of the type of business: disappointment in a Government who do not understand business. None of the Cabinet has ever run one, and it shows.

When the Prime Minister promised that wealth creation would be his party’s No. 1 priority—do hon. Members remember that?—more than 120 business leaders believed him, from the founder of Wikipedia, Jimmy Wales, to Andrew Higginson, the chair of JD Sports. The Prime Minister convinced them that he had a plan to kick-start our economy. Now, six months into the reality of a Labour Government, they are lacing up their trainers and running for the hills.

It does not have to be that way. Instead of tinkering with who is and who is not eligible for inheritance tax relief, we could consider following Sweden’s example, where, having tried heavy inheritance tax charges—

[Mr Angus MacDonald (Inverness, Skye and West Ross-shire) (LD)]

Will the hon. Gentleman give way?

[Graham Stuart]

I will have to press on. Sweden ended up with even, I think, the communists voting to abolish it entirely. Since Sweden scrapped inheritance tax in 2004, entrepreneurship has flourished. Some 8,000 wealthy individuals moved their assets back to the country. Its tax revenues increased by £19.5 billion in a decade.

The planned changes to APR and BPR hurt everyone and help no one. Scrapping inheritance tax may not be a silver bullet, but the evidence suggests it is a policy worth examining.

I return to the saying that trust takes forever to repair. The Prime Minister will not take my word for it, but he should listen to his voters, and recent polls show that 66% of voters believe that Labour does not respect rural communities, and 77% do not trust Labour to manage the economy effectively, or remain unconvinced.

Newer MPs may grandstand and say that it will all blow over—although their appetite to do so seems to be diminishing by the day—and that by 2029, it will be a bad memory for farmers and entrepreneurs. Perhaps they could ask some of their colleagues in the Liberal Democrats how that story ends. After all, in 2010, it took them less than six months to break their promise to students not to raise tuition fees, and it still came up in last summer’s TV debates. Farmers and businessmen, like students, have long memories.

I am a firm believer that we reap what we sow. In the past six months, the Government have sown a dangerous thing—seeds of doubt, and an idea that they cannot be trusted. I had better let the Minister have a short period to respond. However, on behalf of colleagues right across this side of the House—and I think, by their absence, quite a number of colleagues on that side of the House—we ask the Minister, who is a thoughtful and decent man, to go back to the Chancellor and the Prime Minister, and persuade them to change course.

--- Later in debate ---

[James Murray]

I am just about to come on to the details of the reforms that we have made to agricultural property relief and business property relief. If the hon. Gentleman waits a moment, he will see some of the reasoning behind the decisions that we took.

The Government recognise the role that the reliefs play, particularly in supporting farms and small businesses, and under our reforms that will continue. The case for reform is underlined by the fact that the full unlimited exemption, which was introduced in 1992, had become unsustainable. Under the current system, the benefit of the 100% relief on business and agricultural assets has become heavily skewed towards the wealthiest estates. According to the latest data from HMRC, 40% of agricultural property relief benefits the top 7% of estates making claims. That is 117 estates claiming £219 million of relief.

It is a similar picture for business property relief. More than 50% of business property relief is claimed by just 4% of estates making claims. That equates to 158 estates claiming £558 million in tax relief.

[Mr Angus MacDonald]

Will the Minister give way?

[James Murray]

I have only a few moments, so I will make progress.

The Leader of the Opposition has made it clear that she would prioritise that tax break within the public finances, but we do not believe it is fair or sustainable to maintain such a large tax break for such a small number of the wealthiest claimants, given the wider pressures on the public finances. It is for those reasons that the Government are changing how we target agricultural property relief and business property relief from April 2026. We are doing so in a way that maintains a significant tax relief for estates, including for small farms and businesses, while repairing the public finances fairly.

Let me be clear that individuals will still benefit from 100% relief for the first £1 million of combined business and agricultural assets. On top of that, as we know, there will be a 50% relief, which means that inheritance tax will be paid at a reduced effective rate of up to 20%, rather than the standard 40%. Importantly, those reliefs sit on top of the existing spousal exemptions and nil-rate bands. Depending on individual circumstances, a couple can pass on up to £3 million to their children or grandchildren free of inheritance tax.