Treasury ministers stand by farm tax plan

Treasury ministers have stood by the decision to bring farms into inheritance tax next year.

Exchequer Secretary Dan Tomlinson said the Government made “the right decision” at last year’s budget to end a full tax relief for farmers, when they pass on agricultural property.

From April 2026, farm landowners will pay inheritance tax at an effective rate of up to 20% on their agricultural land, but can pass on agricultural and business estates worth up to £1 million without facing a bill.

Mr Tomlinson faced Labour backbench calls to look at tweaks, set out in a Centre for the Analysis of Taxation (CenTax) report into the changes.

CenTax proposed a “minimum share rule”, so that landowners whose farms and businesses make up a small share of their estate – less than 60% – would see a higher tax rate.

This could fund an exemption from paying inheritance tax on land worth up to £5 million, the think tank found.

David Smith, the Labour MP for North Northumberland, asked Mr Tomlinson: “I’m proud to support a Government that believes in progressive taxation, as I’m sure he does, but those with the broadest shoulders should bear the greatest burden.

“The CenTax minimum share rule proposal would mean that farm estates with at least 60% used for farming would receive relief up to £5 million per person. This would reduce the risk of family farms being broken up, place a greater burden on very large estates and those gaming the system, and double the forecast tax take.

“So, would he direct Treasury officials to take another look at the CenTax proposals on (agricultural property relief) prior to the Budget?”

The minister replied that he had read the report and added: “It is worth noting that the number of losers from the policy that is proposed would be more than double the number of people affected by the changes that this Government is putting forward, with over 1,000 estates affected by the proposals put forward by CenTax.”

Maya Ellis said that the Treasury’s argument for dismissing the CenTax report “now seems to be a fear that more people will be subject to inheritance tax under its proposals, even though most of those extra people are essentially private homeowners with agricultural fields”.

The Labour MP for Ribble Valley asked: “Does he not agree with me that Labour values call for supporting hardworking farmers who are the backbone of this country over millionaire homeowners who have money in their wider estate to pay the inheritance tax?”

Mr Tomlinson told the Commons: “On balance, the Government believes that the policy position that was set out at the budget last year is the right decision and we will be continuing with it.”

MPs also heard from James Wild, Conservative shadow Treasury minister, that farmers were “in tears about the family farm tax, not because they’re worried about losing their job, but because the Chancellor is putting at risk generations of farming”.

And Liberal Democrat rural affairs spokeswoman Sarah Dyke said the Government “just doesn’t understand” farmers.

“But there’s still time to act and end months of confusion and misery,” Ms Dyke added.

“So will the Chancellor and her ministers meet with farmers from Glastonbury and Somerton and me to provide some clarity and reveal the full extent of the Government’s discussions on revoking this damaging family farm tax?”

Mr Tomlinson said in response: “Even though this tax is a difficult change – and I don’t shy away from that fact – we believe that it’s the right change to make because it is a way of raising revenue in a fair way that helps contribute to restoring the public finances.”

Chancellor Rachel Reeves will unveil her next Budget on November 26.

Making a speech in Downing Street on Tuesday, she said: “If we are to build the future of Britain together, we will all have to contribute to that effort.

“Each of us must do our bit for the security of our country and the brightness of its future.”