MPs call on Government to delay changes to inheritance tax reforms until 2027
16 May 2025
A report by the cross-party Environment, Food and Rural Affairs Committee today (Friday 16 May) calls on the Government to delay announcing its final agricultural property relief (APR) and business property relief (BPR) reforms until October 2026, to come into effect in April 2027, saying 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 would also protect vulnerable farmers who would have “more time to seek appropriate professional advice”.
MPs note the difficult economic and geopolitical circumstances and praise the Government’s commitments to backing British produce and supporting farmers, but 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.”
They raise concerns that changes announced in the Autumn Budget 2024 were made without adequate consultation, impact assessment or affordability assessment. This means that the impact of the changes “on family farms, land values, tenant farmers, food security and farmers in the devolved administrations” is “disputed and unclear” with a risk of producing unintended consequences. MPs say that “reforms threaten to affect the most vulnerable.” They want the Government to consider alternative reforms before justifying its final approach.
The report refers to a March 2025 survey of UK farmers that found that before the Autumn Budget 70% felt optimistic about the future of their rural businesses, but that number fell to 12% after the Budget. The survey also said that 84% of farmers sampled feel that their mental health has been affected by the Autumn Budget with farmers citing the Sustainable Farming Incentive closure and changes to inheritance tax reliefs as the common areas creating concern.
Reforms to APR and BPR
The Committee supports the government’s aim of reforming APR and BPR to close the loophole which allows wealthy investors to buy agricultural land to avoid inheritance tax, but notes that stakeholders and experts have proposed several alternative ways to reform these taxes so as to achieve this objective without harming small family farms, and asks the Government to consult on these proposals before publishing its Finance Bill in 2026.
The EFRA Committee calls on the Government to publish its evaluation of and rationale for following or not following alternative policy measures presented by stakeholders such as the Institute for Fiscal Studies and the National Farmers Union.
Closure of SFI
The Committee warns that the Government’s sudden closing of the SFI “affected trust in the Government” and “left many farmers without the funding they expected and at risk of becoming unviable in the period before the next scheme is introduced”.
The Government has since announced it will allow SFI applications that were in progress within 2 months of 11 March to progress with restrictions.
The Committee calls for an alternative funding mechanism to be put in place no later than September 2025, to fill the gap in funding for those who missed out on the SFI24.
MPs say the Government should set out, in their response to this report, what the next iteration of SFI will look like and the date it will be open for applications.
Government’s vision for farming
In January, Defra announced its plans to publish a 25-year Farming Roadmap. MPs say that in this, “the Government should urgently set out its vision for the farming sector, achieving food security and the future of the Farming and Countryside Programme.”
The report states that “the 25-year Farming Roadmap should bring together Defra farming policy and programmes into a single vision outlining how they will work together to achieve measurable outcomes for food security and the environment.”
Defra’s communications
The report is critical of Defra’s communications and says there is “a pattern within Defra of poor communication and last-minute decision-making following rumours and Departmental leaks.”
MPs say the “sudden closure” of the Capital Grants scheme in November 2024, which was subsequently reopened, and the ending of SFI 2024 “with no specific warning”, have “been perceived by the sector as a breach of trust”.
The Committee urges that “lessons must be learned from this failure of communication”, saying that “a restoration of trust is urgently required”.
Chair comment
The Chair of the EFRA Committee, Alistair Carmichael MP, said:
“The Committee has taken its work extremely seriously in developing this report and in agreeing our findings. There is an opportunity here to rebuild trust and confidence in the farming sector and I hope that the Government will take our recommendations seriously.
“The way in which the Government has behaved over recent months has clearly negatively affected the confidence and wellbeing of farmers. 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.”
Further information
Image: Unsplash