IHT Rally and Westminster Debate
As farmers rallied with parades of tractors and placards in central London for fairer policies, MPs debated the impact of Inheritance Tax (IHT) on family farms in Westminster on Monday.
Inheritance Tax Debate: Growing Concern Over Impact on Farms
As farmers rallied with parades of tractors and placards in central London for fairer policies, MPs debated the impact of Inheritance Tax (IHT) on family farms in Westminster on Monday. With a shift in tone from Labour backbenchers and renewed calls for clawback measures and tapering, the debate signalled increasing concern over the threat to farm succession and rural jobs. However, the government held firm, rejecting proposals for mitigation.
The debate was instigated via a petition that gathered nearly 150,000 signatures. The discussion highlighted the growing political concern over the impact of proposed IHT (Inheritance Tax) changes on family farms, with MPs from across the political spectrum raising key issues affecting the industry.
Shifting Tone Among Labour Backbenchers
One of the most notable aspects of the debate was a shift in tone from Labour backbenchers, including those who had not previously engaged on this issue. Some key interventions included:
- Ben Goldsborough (Lab, South Norfolk)—repeated CLA Cymru’s key concerns, citing our data on the financial impact of IHT changes on farm profitability and the potential loss of 70,000 jobs.
- David Smith (Lab, North Northumberland)—called for a clawback system to mitigate the impact on affected farms.
- Sam Rushworth (Lab, Bishop Auckland)—stated that there was no shame in the government reconsidering its position on IHT reform.
- Julia Buckley (Lab, Buckinghamshire)—proposed a tapering system to support farmers who may not live the full seven years required to pass on their farms under current IHT rules.
- Chris Hinchcliffe (Lab, North East Hertfordshire)—urged the government to model potential mitigations suggested by his fellow Labour MPs.
As expected, Liberal Democrat and Conservative MPs were also vocal in their support for protecting farm businesses from the unintended consequences of IHT changes.
"The Westminster debate on Inheritance Tax reform has highlighted a growing recognition, across all parties, that these changes could have devastating consequences for family farms. The government’s argument that only profitable farms will be affected is misleading; profitability fluctuates year on year, and for many, the burden of IHT could force the break-up of viable businesses. Farmers need certainty to plan for the future, not policies that threaten succession, food security, and rural employment. We will continue to push for a fairer, more practical approach that protects the future of Welsh farming."
Government Response: Holding Firm
The government’s response remained largely unchanged from previous debates, rejecting calls for a clawback or other mitigations. However, a new argument emerged, suggesting that farms making a profit will be the ones impacted by IHT changes. The government cited data that while the average return on capital for farms is 0.5%, some 10% of farms achieve a 10% return, implying that those farms could withstand IHT reforms.
Additionally, ministers pointed to analysis from the Institute for Fiscal Studies (IFS), arguing that farmland will still be taxed at lower rates than other assets even after the proposed changes.
What Happens Next?
The debate signals increasing pressure on the government to rethink its approach to IHT and farming. CLA Cymru and the CLA national team in London will continue to engage with MPs across all parties, ensuring that pressure remains on the Government to reverse this ill thought through policy.
