Farming Scotland: Labour-majority committee demands delay to farmers' tax due to 'poor' communication

Ministers have been warned by a Labour majority parliamentary group to delay reforms to farming inheritance tax due to “poor” communication in policy that could impact vulnerable farmers.

The Commons Environment, Food and Rural Affairs Committee (Efra), which includes seven Labour MPs, said the UK government had failed to properly consult on the policy, leaving its potential impact “disputed and unclear”.

Farmers protest over Labour's changes to inheritance tax on the Edinburgh city bypass (Picture: Jeff J Mitchell) | Getty Images

It refers to the 20 per cent inheritance rate to be levied on agricultural assets worth more than £1 million, which were previously exempt, from April 2026.

In the farming climate, with the likes of land prices and machinery costs, rural experts have said it does not take much for a modest farm in the UK to add up to £1m in value.

The UK government insist only around 500 farms will be impacted, but the figure is disputed, with rural groups claiming the impact will extend a lot further.

READ MORE: Scotland included in £40m project to connect rainforest habitat along UK coastline

In a report published on Friday, Efra called on ministers to push back announcing its final agricultural property relief (APR) and business property relief (BPR) reforms until October 2026, to come into effect in April 2027.

The group of MPs suggested that doing so would bring a “better formulation of tax policy”, which would buy more time for “vulnerable farmers” to seek advice.

Get the Hay’s Way newsletter each week - subscribe now

The committee backed the UK government’s aim of revising APR and BPR to “close the loophole” allowing wealthy investors to buy agricultural land to avoid inheritance tax.

But it said stakeholders and experts have proposed several alternative ways to reform these taxes that could help them avoid impacting other smaller family farms.

These include increasing the tax-free combined cap for both taxes to £20m, but with a potential “clawback period” in which any land sold after being passed on is tapered to avoid a financial cliff-edge.

The Country Land and Business Association (CLA) has said this option could limit the damage to businesses and allow rural and other family firms to continue to make medium and long-term investment decisions.

The cross-party group also took aim at the Department for Environment, Food and Rural Affairs (Defra) for “poor communication and last-minute decision-making following rumours and departmental leaks”.

The committee said: “The lack of proper evaluation of the impact of these changes means that the scale and nature of its impact on family farms, land values, tenant farmers, food security and farmers in the devolved administrations is disputed and unclear and comes with a considerable risk of negative unintended consequences.

“As such, the reforms threaten to affect the most vulnerable, including those who are older or are farming less profitable or tenanted holdings.”

Efra also questioned the “sudden” closing of the sustainable farming incentive (SFI), a green funding scheme for agricultural for farmers, which it said “affected trust in government”.

The government has since announced it will allow SFI applications that were in progress within two months of March 11 to progress with restrictions.

Efra chairman and Liberal Democrat MP Alistair Carmichael said ministers appeared to be totally “dismissing farmers’ concerns” and ignoring the impact the proposals have had on the sector.

He said the communication with farmers had been “poor, with confusing and sometimes contradictory messaging.”

“Farmers urgently need clarity, certainty and advance notice of changes – they cannot be expected to rethink their businesses on a whim,” he said. “It is essential that Defra focuses on rebuilding trust through good-faith communications with the sector.”

A UK government spokesperson pointed to its £5 billion investment in farming, adding: “Our reforms to Agricultural and Business Property Relief are vital to fix the public services we all rely on. Three quarters of estates will continue to pay no inheritance tax at all, while the remaining quarter will pay half the inheritance tax that most people pay, and payments can be spread over ten years, interest-free.”

Committee members include Lib Dem MP Sarah Dyke, Tory MPs Charlie Dewhirst and Sarah Bool, and Labour MPs Helena Dollimore, Jayne Kirkham, Andrew Pakes, Tim Roca, Henry Tufnell, Josh Newbury and Jenny Riddell-Carpenter.