The committee of MPs has urged the UK Government to hold off announcing changes to inheritance tax (IHT) on farmers until October 2026, before they come into force in the following year (April 2027).
The report from EFRA suggests a pause in the implementation of the reforms “would allow for better formulation of tax policy and provide the Government with an opportunity to convey a positive long-term vision for farming.”
It adds that it would also protect vulnerable farmers who would have “more time to seek appropriate professional advice”.
The group are concerned that “high-profile policies have been announced prior to the completion and publication of the strategies and reviews that Defra says will inform and guide its vision”.
In addition, they have argued that changes announced in the Autumn Budget (when the IHT raid was revealed) were made without adequate consultation, impact assessment or affordability assessment. Therefore, the effect “on family farms, land values, tenant farmers, food security and farmers in the devolved administrations” is “disputed and unclear” and could even introduce unintended consequences.
The MPs content the “reforms threaten to affect the most vulnerable” and as such call for the Government to consider alternative reforms before justifying its final approach.
This follows a sharp decline in optimism from farmers over the future of their businesses following the Budget – dropping from 70% prior to 12% after the changes were revealed.
The survey, which was taken in March 2025, also showed that 84% of farmers feel that their mental health has been affected by the Autumn Budget, with many citing the Sustainable Farming Incentive closure and changes to IHT reliefs as areas of concern.
What is inheritance tax, what’s changed and why?
An IHT relief increases the tax-free threshold or reduces the value of an asset, therefore reducing the amount of tax that is payable. Among these reliefs, Agricultural Property Relief (APR) and Business Property Relief (BPR) allow estates to reduce the value of eligible agricultural or business property for inheritance tax.
The Autumn Budget 2024 saw the Labour government announced that, from April 2026, the availability of 100% relief for agricultural and business property would be capped at £1 million with a reduce rate of 20% being charged above that (rather than the standard IHT rate of 40%).
The changes will prevent a loophole in the system which currently enables wealthy investors to buy agricultural land to avoid IHT. While the EFRA Committee has said it supports the move to close this loophole, it notes that alternative ways are available which will not harm small family farms and recommends the Government to review these.
‘Defra’s communications with farmers have been poor’
“The way in which the Government has behaved over recent months has clearly negatively affected the confidence and wellbeing of farmers,” said EFRA Committee chair, Alistair Carmichael MP.
“Changes to APR and BPR in the Autumn Budget, the sudden closure of the Capital Grants scheme in November 2024, and the abrupt ending of SFI applications in March have all led farmers to feel that they cannot rely on the Government to live up to its commitments. The Government, however, seems to be dismissing farmers’ concerns and ignoring the strength of feeling evidenced in the months of protests that saw tractors converge on Westminster and up and down the country.
“We have seen that Defra’s communications with farmers have been poor, with confusing and sometimes contradictory messaging. There has been a lack of adequate consultation. Policies affecting farmers have been announced without due consideration or explanation of their impact or their rationale.
“Farmers ought to be the essential element in the Government’s plans both to achieve food security and to restore and protect the environment. When they make decisions for their businesses, farmers have to plan for the long term - but the landscape they are operating in currently is unclear. Farmers urgently need clarity, certainty and advance notice of changes - they cannot be expected to rethink their businesses on a whim. It is essential that Defra focuses on rebuilding trust through good-faith communications with the sector.”
