Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment she has made of the potential impact of changes to (a) Agricultural Property Relief and (b) Business Property Relief on (i) food security, (ii) agricultural investment and (iii) the viability of family-run farms.

The Chancellor wrote to the Chair of the Treasury Select Committee about the reforms to agricultural and business property reliefs announced at the 2024 Autumn Budget: https://committees.parliament.uk/publications/45691/documents/226235/default/.

The UK Government’s analysis is based on the number of estates expected to pay more inheritance tax rather than the number of farms or businesses affected. This is because inheritance tax is a wealth transfer tax on the estate (the property, money, and possessions) of someone who has died.

The number of claims for these reliefs, meaning how many estates would be impacted by this change, is affected by many things such as: who owns the business; the nature of that ownership; how many owners there are; the level of debt; and how they plan their affairs. The UK Government remains firmly of the view that claims data is the correct way to understand an inheritance tax liability.

The reforms are expected to result in up to around 520 estates claiming agricultural property relief, including those that also claim business property relief, paying more inheritance tax in 2026-27. Almost three-quarters of estates claiming agricultural property relief, including those that also claim for business property relief, would not pay more tax in 2026-27.

Around 1,500 estates claiming only business property relief are expected to be affected in 2026-27, with around 1,000 of these holding shares designated as “not listed” on the markets of recognised stock exchanges, such as the Alternative Investment Market. The remaining 500 estates will include business assets from sectors across the economy that are eligible for business property relief.

These reforms mean that around three-quarters of estates claiming business property relief in 2026-27 (excluding those only relating to holding shares designated as “not listed” on the markets of recognised stock exchanges) will not pay more inheritance tax in 2026-27.

The costing for this tax change was certified as ‘reasonable and central’ by the Office for Budget Responsibility (OBR) at Autumn Budget 2024. The OBR has published more detail about the assumptions underpinning the costing here: https://obr.uk/download/october-2024-economic-and-fiscal-outlook-costing-of-changes-to-agricultural-and-business-property-relief/?tmstv=1738846567.

In accordance with standard practice, a tax information and impact note will be published alongside the draft legislation before the relevant Finance Bill.