IHT reforms will break up Britain’s family farms, MPs warn

Family farms across the UK face being broken up or sold off under the government’s proposed inheritance tax reforms, opposition MPs have warned, as alarm grows over the future of intergenerational farming and rural businesses.

During a Westminster Hall debate on Tuesday (3 June), MPs from across the political spectrum said that changes to agricultural and business property relief – announced in the Autumn Budget – could force family-owned farms to sell land or close altogether.

See also: Inheritance tax report a ‘wake-up call’, says NFU

From April 2026, a new £1m cap will apply to relief on inherited farm and business assets. Anything above that threshold will be taxed at 20% – a shift from the current 100% exemption.

“This could destroy the farming sector,” warned DUP MP Jim Shannon, saying the tax fails to reflect the nature of agriculture, where high-value land and equipment rarely generate liquid assets.

Food security and jobs ‘at risk’

Leading the debate, Liberal Democrat MP for Mid Dunbartonshire Susan Murray called the reforms “hostile” to businesses that underpin rural economies.

“These are not offshore tax shelters or luxury assets. They are working farms, many run by the same families for generations, that provide jobs, food security, and community stability,” she said.

Fresh economic analysis commissioned by Family Business UK, based on modelling by the CBI, warns the reforms could lead to the loss of 208,000 jobs and wipe £14.8bn from the UK’s gross value added.

Ms Murray urged the government to consider a proposal by the Scottish Chambers of Commerce, among others, to raise the cap to at least £2m and explore exemptions for genuine succession planning.

“That would make more family businesses exempt from this dangerous inheritance tax, thereby protecting jobs and local businesses.” 

The NFU and others have proposed an alternative “clawback” system, deferring inheritance tax if farms or businesses remain in family ownership for a defined period.

They argue it would preserve continuity while raising more money long-term.

The Treasury has rejected the idea, however, saying it would add complexity and undermine the reforms’ clarity.

Treasury unmoved

Treasury minister James Murray defended the policy as “difficult but necessary” to fix public finances.

He highlighted full relief on the first £1m and interest-free tax instalments over 10 years.

“We have listened, but we remain confident that our approach is a fair way to balance supporting farms and businesses with fixing the public finances, so we stand by our reforms,” he said.