Farming and Inheritance Tax

Harriet Cross Excerpts

Wednesday 4th December 2024 Commons Chamber

[James Murray]

I am going to make some progress.

I just set out some statistics that show how this tax relief is very concentrated in a small number of claims. In the context of the dire fiscal situation we inherited and the critical need to fix the public finances and get public services back on their feet, it cannot be right to maintain such a significant level of relief for a very small number of claimants. That is why, from 6 April 2026, the full 100% relief from inheritance tax will be restricted to the first £1 million of combined agricultural and business property. Above that amount, there will be an unlimited 50% relief, so inheritance tax will be paid at a reduced effective rate of up to 20%, rather than the standard 40%.

The new system, it should be noted, remains more generous than in the past. As I mentioned, the rate of relief prior to 1992 was a maximum of 50% on all agricultural and business assets, including the first £1 million. The reliefs we are providing will be on top of all the other exemptions and nil-rate bands that people can access for inheritance tax. Taken in combination, this means that a couple with farmland will typically be able to pass on up to £3 million-worth of assets to their descendants without paying any inheritance tax.

[Harriet Cross (Gordon and Buchan) (Con)]

I thank the Minister for giving way. The CAAV calls the £3 million figure “unrealistic” and “unreasonable”. Does he not agree?

[James Murray]

The £3 million figure is what a typical couple could expect to pass on to their direct descendants using the various nil-rate bands and inheritance tax reliefs. I would advise any specific family to get advice from an accountant or financial adviser. In terms of the scale of reliefs, when we combine the inheritance tax relief to agricultural and business property relief, along with the nil-rate bands, nil-rate residence bands and the transferability between spouses, that is how we come to the figure of £3 million.

--- Later in debate ---

[James Murray]

I am going to make some progress. I have given way many times already.

Looking at the HMRC data, which relates to estates making claims for agricultural and business property relief, is the correct way to understand inheritance tax liabilities. That data shows that our reforms are expected to result in up to 520 estates claiming agricultural property relief, including those that also claim business property relief, paying some more inheritance tax in 2026-27. Let me put that in context. It means that nearly three quarters of estates claiming agricultural property relief, including those that also claim business property relief, will not pay any more tax as a result of these measures.

As this change is introduced, we expect people to respond in a number of ways to reduce their inheritance tax liabilities, and the costings by the Office for Budget Responsibility assume that that will be the case. People may change ownership structures, plan for their succession differently, and make greater use of gifting provisions and insurance.

[Harriet Cross]

I thank the Minister for giving way; he is being generous. He has mentioned claims for agricultural property relief and business property relief, but what about claims for business property relief alone? Have they been included in his figures?

[James Murray]

I thank the hon. Lady for her intervention. As we know, any farmer who is renting out land or farming it themselves will typically have an estate that includes an element that is eligible for agricultural property relief. The figures I set out include those who claim for business property relief as well, and those figures are set out in the Chancellor’s letter to the Treasury Committee.

--- Later in debate ---

[Jon Pearce]

Sorry, I will not give way at this stage.

This debate has, however, shone an important light on one issue, which I am grateful to the right hon. Member for Orkney and Shetland (Mr Carmichael) for raising: the fact that our farmers are working day in, day out, for very little profit. The question is how we support them to be profitable again. Energy bills are one of the biggest costs farming businesses face. This Government will help bring down those costs through GB Energy and by introducing grid reform to allow farmers to plug renewables into the national grid. We must protect them from being undercut by foreign imports.

[Harriet Cross]

Will the hon. Gentleman give way?

[Jon Pearce]

I am sorry, but I will not.

We must create a greater marketplace for farming businesses by using the Government’s purchasing power to ensure that 50% of the food bought for our hospitals, prisons and army bases is produced by local farmers.

Here is the most important point: we have to provide farming businesses with economic stability. The Leader of the Opposition has already failed to learn the lessons of the Liz Truss Budget, with £6.7 billion of unfunded tax cuts already announced in a matter of weeks. The Opposition need to tell us how they are going to pay for that. What are they going to cut? Are they going to cut the farming budget—are we going to lose the £5 billion from the farming budget?—or are they going to borrow and put us right back in the position we were in with Liz Truss, with interest rates rising and farms going out of business? I will not be voting for the Opposition motion; I will be supporting farmers in my constituency and providing the economic stability they need.

--- Later in debate ---

[Joe Morris]

They absolutely do; my hon. Friend is right. What people—not just farmers—speak to me about is the need for that growing, stable economy. They are infuriated with the Conservative party for pretending to jump on a bandwagon after taking farmers for granted for 14 years while in government.

[Harriet Cross]

Before the Budget, the hon. Member will remember attending a Westminster Hall debate that I organised specifically on agricultural property relief and business property relief. Will he agree that the Conservatives have not jumped on that since the Budget? We have been speaking about it for a very long time.

[Joe Morris]

I thank the hon. Member for her intervention. She and I must have a slightly different view of a very long time. A few weeks ago is not a very long time for me. I am talking about years in which local farming communities were ignored.

The botched Brexit deal that the Conservative party secured did not do any farmer any favours. Labour is the only party that is genuinely serious about countryside renewal. We cannot pack communities across Northumberland in aspic and pretend that they do not need houses or services. That is why the Conservatives lost. That is why I am here.

--- Later in debate ---

[Andy MacNae]

It is amazing; one of my colleagues talked about “the green fields opposite” in reference to the empty Conservative Benches.

Given that background, it is no surprise that farmers are angry, worried and feeling vulnerable. I associate myself with the remarks made by the hon. Member for Tiverton and Minehead (Rachel Gilmour), who called for calm and sense in the debate. Emotive language, designed to sow fear and cause concern is irresponsible at the very least, so let us try to keep to the facts and keep things calm and reasonable.

The focus of Conservative Members seems to be family farms, but the phrase “family farm tax” immediately creates a sense of fear and targeting, which is completely wrong. With some sensible tax planning, £3 million of assets can be exempt. Many speeches have glanced over the importance of gifting rights. Let us take the scenario of a family farm, in its truest sense, that is to be passed between generations. Surely, gifting rights are a massive opportunity to avoid all inheritance tax and remove the sense of fear that Conservative Members are trying to create. Most of the rest of the country has to do that simple estate planning by default.

[Harriet Cross]

As the hon. Gentleman will be aware, reservation of benefits applies when an asset that is still being used is passed on under the seven-year rule. Is he suggesting that a farmer who has been on their farm for their whole life should move out of their farmhouse, get off the land and pay market rate rent? Where will they get that money from, given that, as we know, farm profits are so small?