Bid to soften farm tax change rejected by Treasury

The department was informed about the policy the night before it was announced in the Budget.

The move has been branded "disastrous" by the National Farmers' Union (NFU), with some farmers warning it would decimate the countryside.

Defra suggested softening the policy to exempt some older people, possibly those over the age of 80.

The April 2026 start for the policy means they may not have time to make use of existing rules to skip inheritance tax by passing on an asset seven years before death.

But this suggestion has been dismissed by the Treasury, which said it had taken "a fair and balanced approach".

Since its introduction in 1984, agricultural property relief (APR) has allowed small family farms – including land used for crops or rearing animals, as well as farm buildings, cottages and houses - to be exempt from inheritance tax.

The Treasury said 40% of APR had been going to "the 7% wealthiest claimants", and that it had "made a difficult decision to ensure the relief is fiscally sustainable".

It put this against a backdrop of “public services crumbling [and] a £22bn fiscal hole inherited from the previous government".

“Around 500 claims each year will be impacted and farm-owning couples can pass on up to £3m without paying any inheritance tax - this is a fair and balanced approach," a spokesperson added.

There are divisions in government over the change.

Some ministers believe it will only have an impact on relatively wealthy farmers - a couple using all their inheritance tax benefits will be able to pass on a £3m farm tax free. Any inheritance tax charge on farms can be paid over 10 years.

But other ministers believe the chancellor is in danger of undermining Labour’s relations with rural Britain while raising a relatively small amount of money.

The change could raise around £560m.

Some sources in government have expressed concerns that the chancellor is creating unnecessary grief over a change that is not, in relative terms, a huge money spinner.

There are concerns that the change - which has proved controversial among farmers since its announcement - could become “totemic” in rural Britain.

During rural affairs questions in the Commons, Conservative shadow environment minister Robbie Moore accused the government of "arrogance" and urged ministers to publish a full impact assessment of the change.

Environment minister Daniel Zeichner reiterated the government's figures that fewer than 500 farms a year would be affected.

He added there were ways the change could "be managed" and called on Conservatives to "join me in reassuring British farmers about their future".

Another Tory MP, former cabinet minister Sir Jeremy Wright, asked if ministers had considered limiting inheritance tax exemptions to those who could prove a farm had been in family ownership for "a certain number of years".

Zeichner replied that the issue was "complicated", adding "in future we will have further discussions".

Lib Dem environment spokesman Tim Farron said the tax rise would be a "disaster for family farms".

"Rather than blocking pleas from Defra to rethink, the chancellor must urgently meet with the farming community and NFU to better understand their heartfelt concerns and reverse the tax hike".

A Defra spokesperson said: “With public services crumbling and a £22bn fiscal hole inherited from the previous government, we have made the difficult decision to reform Agricultural Property Relief in a balanced and fair way.

“All ministers support the policy and it will not change.”