Inheritance Tax Relief: Farms

Rachel Taylor Excerpts

Monday 10th February 2025 Westminster Hall

[Rachel Taylor (North Warwickshire and Bedworth) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Edward. There is no doubt that farmers have suffered hugely over the past 14 years, with the damaging impact of botched Tory trade deals and trade barriers doing a huge amount to undermine their hard work. I know that there is so much that the Government can do and are doing to support farmers.

I welcome the £5 billion pledged over two years to support farming, which is the biggest sustainable food production investment we have ever seen. That will make a huge difference, but I must be honest: some farmers in my constituency have raised concerns with me about the tax changes announced in the Budget, including the 40 or so farmers that I met this morning in my constituency. That is why I felt it was important to speak in this debate: to give them a voice and convey their concerns directly to the Minister.

First, I support Government efforts to tackle the actions of some of the wealthiest people in our society, who are buying up farmland to avoid inheritance tax. Those selfish individuals are not only starving our public services of much needed funds, but are undermining farming by inflating the price of farmland and preventing young farmers from entering the sector. Tackling that fundamental problem is something that many farmers in my constituency support.

I will list some of the concerns raised by farmers in North Warwickshire and Bedworth, starting with Robert, from Overhouse farm in Dordon, who asked whether the inheritance tax threshold could be raised beyond £1 million. Joe and Martin Brandreth, famers from Fillongley and Bedworth in my constituency, asked what steps the Treasury has taken to forecast future farmland valuations of how much this tax will raise, to ensure the policy has been calculated on the basis of valuations of properties at the point of tax, and not on historic values.

Helen Fisher from Grendon expressed her concerns that changes to inheritance tax will reduce the incentive for farms to invest in improving their productivity. Will the Minister confirm what action is being taken to ensure that farmers are incentivised to make their farms more productive? Chris Corbett from Atherstone raised concerns about the impact that erratic weather is having on the productivity of his farm, with a 30% drop in harvests this year. Will the Minister set out what the Government are doing to support farmers to adapt to the challenge of climate change and improve productivity?

Ralph Arnold from Seckington, which is near Tamworth, asked whether the Government could consider rethinking nitrogen fertiliser tax, or exempting double-cab pick-ups from vehicle taxation when they are in use as essential farm vehicles. Finally, Adam Beaty is a tenant farmer who is concerned about the impact on him should his landlord try to sell to cover an inheritance tax liability.

I wanted to make a number of other points, but time is short. Farming is fundamental to the fabric of our nation, and is at the heart of my constituency.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (James Murray)]

It is a pleasure to speak in this debate with you in the Chair, Dr Murrison. I begin by extending my thanks, as other Members have, to my hon. Friend the Member for South Norfolk (Ben Goldsborough) for opening today’s debate. I recognise his commitment to making sure that his constituents’ opinions are heard here today. I also thank all other hon. Members who have contributed to today’s debate for setting out their views.

I appreciate that some Members disagree with either the principle or the detail of the changes that the Government have announced to agricultural and business property reliefs. It is important to be able to debate this issue here today, given the public interest in this topic. I am aware of the strength of feeling, both within the room today and outside, including from the almost 150,000 people who have signed this petition. I understand, as the petition sets out, that there are concerns about the impacts of the reforms to the reliefs, particularly on working farms.

I will seek to address the points that hon. Members have raised in a moment, but, first, I would like to emphasise the fact that the decision to reform agricultural and business property reliefs was not taken lightly. It was one of many tough decisions that we had to take at the autumn Budget in 2024, given the incredibly challenging fiscal position we inherited from the previous Administration.

[Rachel Taylor]

Does my hon. Friend agree that, until we improve the living standards of ordinary working people, we will never drive up the profitability or sustainability of family farms? It is the Conservative party, with its Budget choices, that devastated our rural communities, and only a Labour Government will focus on improving living standards for every single person living in my constituency of North Warwickshire and Bedworth.

[James Murray]

I thank my hon. Friend for her intervention. She is absolutely right about the importance of repairing the public finances and supporting public services, for her constituents in North Warwickshire and Bedworth and indeed for all of our constituents across the country.

I noted that, in her contribution earlier, my hon. Friend made a point about what this Government are doing to support the profitability of the farming sector. She may have seen that, at the Oxford farming conference in January, the Secretary of State for Environment, Food and Rural Affairs set out the Government’s long-term vision. That includes reforms to use the Government’s own purchasing power to make sure that we are buying more British food, planning reforms to speed up the delivery of infrastructure, and work to ensure supply chain fairness, which will help people involved in the farming industry and more widely, across her constituency and those of other Members here today.

As I said, the decision that we took to reform agricultural property relief and business property relief was one of the difficult but necessary decisions that we needed to take on tax, welfare and spending to restore economic stability, to fix the public finances and to support public services, including an NHS in crisis. We have taken those decisions in a way that makes the tax system fairer and more sustainable.

The reforms to agricultural property relief and business property relief mean that, despite the tough fiscal context, the Government will still maintain significant levels of relief from inheritance tax beyond what is available to others. The Government recognise the role that these reliefs play, particularly in supporting small farms and businesses, and, under our reforms, they will continue to play that role.

The case for reform is underlined by the fact that the full, unlimited exemption, as introduced in 1992, has become unsustainable. Under the current system, the benefit of the 100% relief on business and agricultural assets is heavily skewed towards the wealthiest estates. According to the latest data from HMRC, and as hon. Members have mentioned, 40% of agricultural property relief benefits the top 7% of estates making claims—that is 117 estates claiming £219 million-worth of relief.