'It needs to be stopped' - MPs call for delay to farms tax

16 May 2025, 11:08 | Updated: 16 May 2025, 11:35

MPs have called for year-long delay to the governnent's controversial farm inheritance tax changes, which sparked mass protests at Westminster.

In a report released today, the Environment, Food and Rural Affairs (Efra) Committee said the changes to the tax regime were made without "adequate consultation, impact assessment or affordability assessment".

Speaking to LBC, convener of the committee, Lib Dem Orkney MP Alistair Carmichael, said the whole plan "needs to be stopped", and the changes were "an unnecessary piece of political aggravation."

But he admitted the tax breaks currently on agricultural land were "being abused" by the "super rich".

Government plans to tax inherited agricultural assets worth more than £1m at a rate of 20% were unveiled in the Autumn Budget.

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But Efra's report says they "threaten to affect the most vulnerable" and delaying the implementation until April 2027 would give those farmers more time to seek "appropriate professional advice".

Mr Carmichael told LBC: "The 100% relief for farmers handing on land down the generations is very important, and that ability to hand land on has got to be protected, but it is being abused.

"We know that the super rich buy up land, which is pushing up the price, taking land out of active food production, and that is what needs to be addressed here.

"But as one of the witnesses to the inquiry said, the way the government is doing it actually has the perverse outcome of penalizing the people they say they want to protect, the family farms, but actually protecting those that they say they want to penalize, because at 20% this is still actually quite a tax efficient way of sheltering your wealth.

"It needs to be stopped, looked at properly, do all the impact assessments, have all the consultations and then come forward with a set of proposals, which is not impossible, in fact, it's not even that difficult - and that will command support amongst farmers, will keep food land and active food production and build that consensus."

He added: "I think the root cause of the problem here is that Treasury just does not understand how poor a return farming is on the capital that's invested.

"If you think in Orkney my own home county, an average family farm there will be worth around about £3 million. So the inheritance tax liability on that will be £400,000. But that farm is probably generating a net profit of about £25 to £30,000 a year. So you can see on these figures, if you're going to pay a tax bill, then inevitably you end up having to sell land, and it will be sold to people who take it out of food production.

"Remember, the Prime Minister tells us food security is national security. So actually, taking land out of food production is something that actually is counterproductive. And really, you know that it just highlights the extent to which this was just not properly thought through."

National Farmers' Union (NFU) president Tom Bradshaw said a delay would not "take the terrible pressure off older farmers".

He said the policy remained "fundamentally unfit, destructive, badly constructed and must be changed".

The government says the changes will only affect the wealthiest 500 farms each year, but the NFU and the Country Land and Business Association (CLA) estimate that up to 70,000 farms could be affected overall.

Mr Carmichael said a "consensus" had developed in Westminster and Holyrood that "we don't really need farmers."

"You know, we can import all our food now. Well three years ago, Vladimir Putin invaded Ukraine, and we saw the foolishness of that. Now you've got Donald Trump back in the White House, rewriting the rules of trading almost by the day.

"I think that domestic food production has got to be brought back right to the heart of of our agricultural policy again. And to do that, we need to keep our farmers on the land producing food. It's a bit of a sort of counter intuitive thought for many. But, you know, when the facts change I change my mind. I think there has to be a bit more of that amongst our ministers and our policy makers."

Asked if he thought the government would take on board the committee's recommendations, he said: "The significant thing is that I chair a committee of 11 MPs. Seven of them are Labour MPs, and this is a unanimous report.

"So you know, the government have refused to listen to opposition MPs. They have refused to listen to the farming unions and other organisations, but they are now getting the message from their own back benchers. And you know, any government that thinks they can ignore the views of their own back benchers, and I speak as a former chief whip myself, can very quickly run into difficulty.

"Given that everybody agrees on the ultimate purpose here about closing that one loophole, this just feels like an unnecessary piece of political aggravation to me."

He also said the government should look at raising the threshold for when the tax kicks in from £1m or introducing a "clawback scheme".

He added: "We need to take a pause and think. how to do it properly, and if you did that the enormous anxiety that you've got amongst farmers, maybe in their 70s and their 80s at the moment, who for years have held on to the land because they were told by accountants and tax advisors and others that that was the sensible thing to do, and who now won't have the seven years that you would need if you were to hand on the land to the next generation while you're still alive, that sort of injustice would be avoided completely."

A clawback scheme has been backed by the Country Land and Business Association, which represents 28,000 farmers and rural businesses. It says such a scheme would see 100% agricultural and business property reliefs emain 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.

CLA president Victoria Vyvyan said the "clawback" proposal would limit the damage to family businesses while targeting "those who have bought land to shelter wealth for short-term gain".

"The government has dug itself into a deep hole by targeting family farms and businesses, and must now pause, listen and consult," she said.

But a government spokesman said that under its changes three quarters of estates would continue to pay no inheritance tax at all, while the remaining quarter would "pay half the inheritance tax that most people pay".

He added that payments could be spread over 10 years, interest-free.