Controversial changes to inheritance tax in the farming sector are being challenged by MPs, with calls to delay them by a year and consider alternatives.
The changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), which are set to dramatically alter how farmland and family-run businesses are passed down to future generations, have been greatly opposed since first being announced in last year’s Autumn Budget.
But whilst the government has remained steadfast in its introduction of the reforms, a recent parliamentary report, has claimed they lacked “proper evaluation” that come with “a considerable risk of negative unintended consequences”.
Thrings Private Client Partner Sam Doherty takes a look at the proposals.
What’s changing?
APR is an inheritance tax (IHT) exemption that reduces the amount payable on the value of agricultural land and property, whilst BPR provides a similar exemption for business assets – which can be equally vital for farming businesses.
Both currently reduce the taxable value of an estate by up to 100%, provided the criteria is met, but this is set to change from April 2026 which confirmed only the first £1million of any qualifying estate would be subject to the 100% relief. Any qualifying assets over that threshold will be subject to a 50% relief – an effective tax rate of 20%.
You can find out more about the changes to APR and BPR here, as well as what farmers and landowners can do to plan ahead of their implementation.
What are MPs calling for?
Criticism of the lack of consultation or assessment on the changes has featured heavily in a report released by the Environment, Food and Rural Affairs (Efra) Committee, who are responsible for scrutinising the work of Defra, from where the policies originated.
Whilst supportive of the government’s objective to “close the loophole that has encouraged wealthy investors to buy agricultural land to avoid inheritance tax”, the committee highlighted its concern over the “lack of proper evaluation” of the potential impact of the changes with “no consultation, impact assessment or affordability assessment was conducted before the announcement of the reforms”.
Calling for a “pause” in the implementation of reforms, the committee said that there was sufficient time for the government to assess potential alternatives and develop “better tax policy” and recommended delaying confirmation of any final changes until October 2026, to come into effect in April 2027, giving would “more time to seek appropriate professional advice”.
Among the alternatives suggested by external organisations, including the Country Land and Business Association (CLA), is the idea of a “clawback” scheme under which 100% agricultural and business property reliefs would remain but inheritance tax would be applied to assets if sold within a certain period of time post-death, payable out of the proceeds of the sale.
Sam Doherty, Partner in Thrings’ Private Client team, said: “With the unrest the government’s planned changes to APR and BPR have caused, it is surprising that it has taken more than half a year for parliament to have taken notice. Whilst these recommendations aren’t necessarily going to signal change, it is good to see some MPs taking note of the concerning predicament that these reforms put farmers in.
“The report hits the issue right on the head, that these policies have come out of nowhere, with a lack of consultation or engagement with the sector likely to cause a sector that is already struggling with yet another problem. A delay, as has been called for in the report, would certainly give the government more time to consider alternatives, such as the clawback concept, which would arguably be a much more sensible way to address the issue, however certainty is also needed for farmers so that affective planning can be put into place.
“Pushing back implementing any changes would also allow farmers more time to assess their options and properly plan for the future, but with the uncertainty that is still in the air around APR and BPR, it is important they begin engaging with legal advice sooner rather than later.”
Thrings’ Private Client lawyers are experts in supporting individuals and families with a range of personal matters that are important to you. Whether it relates to a family business, land or private wealth, their expertise is there to help plan ahead in all areas ranging from succession planning and trusts, to wealth management, wills and probate. To find out more, please get in contact.
