Farm groups seek IHT changes as Finance Bill progresses

Farm organisations are pressing for further changes to the government’s farm inheritance tax plans, as the Finance Bill reaches its crucial “report stage” in the House of Commons on Wednesday (11 March).

The Tenant Farmers Association (TFA) says it welcomes some of the improvements since the plans were first announced in October 2024, such as increasing the inheritance tax (IHT) threshold to £2.5m and making this relief transferable between spouses.

See also: Where now for the tenanted farm sector?

However, in a letter to chancellor Rachel Reeves sent on Monday (9 March), the TFA says it is seeking two further amendments “to protect hard-working farming families operating their holdings under agricultural tenancies”.

The first step is to free from tax the inherited value of a joint agricultural tenancy, following the death of one of those joint tenants.

“Although the inherited share of an agricultural tenancy will have a theoretical value, it is not a value that can be realised by beneficiaries,” said TFA chief executive George Dunn.

“Those who inherit a share of a joint tenancy have no means to capitalise on that and will have no way to liquidate the asset in the context of a continuing business to allow them to pay tax.

“This is inherently unfair and must be addressed by government.”

Long-term lets

The second step is to protect and encourage longer-term letting by landowners, given that the number of farm business tenancies is declining, as it the average length of a farm let.

“Sadly, the planned restriction on agricultural property relief is causing private estates to either remove land from the tenanted sector entirely, or to let only on a short-term basis so that the asset is close to hand if an unexpected tax bill arises,” said Mr Dunn.

The TFA says it is grateful to both Liberal Democrats and Conservative MPs for tabling 12 amendments to the bill addressing these two concerns.

Outside investors

Meanwhile, NFU president Tom Bradshaw says he remains “fundamentally opposed” to the whole concept of inheritance tax being levied on farm assets.

“It does nothing to disincentivise outside wealth investing in land, risks the opportunity for longer-term tenancies, and jeopardises some of our more productive farming businesses,” said Mr Bradshaw.

“That is why we are working with opposition parties that have publicly supported overturning the policy, with the aim of turning those promises into manifesto commitments that protect active farm businesses.”

Country Land and Business Association president Gavin Lane says the IHT changes remain flawed and would continue to harm many family-owned businesses.

“In the immediate term, ministers can help by extending the period before which inheritance tax must be paid from six to 12 months, and increase the relief for woodland areas to ensure tree planting isn’t hit by the changes,” said Mr Lane.

“For the benefit of the country’s growth and investment agenda, we will continue to campaign for a full reversal.”