EFRA Committee Calls For Urgent Delay To IHT Reforms

The Environment, Food and Rural Affairs (EFRA) Committee has recommended that the UK government postpone its proposed inheritance tax (IHT) reforms affecting agricultural and business property reliefs (APR and BPR) until April 2027, with the final policy announcement deferred to October 2026.

This delay aims to facilitate more comprehensive policy development and provide farmers, particularly those operating small family farms, with additional time to seek professional advice and adapt to the forthcoming changes.

The proposed reforms, introduced by Chancellor Rachel Reeves in the Autumn Budget 2024, suggest imposing a 20% IHT on agricultural assets exceeding £1 million. While the government contends that existing exemptions would allow couples to transfer farms valued up to £3 million tax-free, critics argue that many family farms could still face significant tax burdens.

The EFRA Committee expressed concerns over the lack of adequate consultation, impact assessments, and affordability evaluations prior to the announcement of these reforms. They warned that the changes could adversely affect family farms, land values, tenant farmers, and food security, particularly in devolved administrations. The committee also highlighted the potential for unintended consequences, emphasizing the need for the government to consider alternative approaches before finalizing its policy.

In addition to the IHT reforms, the committee criticized the Department for Environment, Food and Rural Affairs (Defra) for its abrupt termination of the Sustainable Farming Incentive (SFI) scheme, which they claim undermined trust in the government and left many farmers without expected funding. They urged the government to establish an alternative funding mechanism by September 2025 to support those affected by the closure of SFI24.

Alistair Carmichael MP, Chair of the EFRA Committee, stated: “The way in which the Government has behaved over recent months has clearly negatively affected the confidence and wellbeing of farmers. Changes to APR and BPR in the Autumn Budget, the sudden closure of the Capital Grants scheme in November 2024, and the abrupt ending of SFI applications in March have all led farmers to feel that they cannot rely on the Government to live up to its commitments.”

The committee's report also references a survey conducted in March 2025, which found that optimism among UK farmers about the future of their rural businesses plummeted from 70% before the Autumn Budget to 12% afterward. Additionally, 84% of respondents reported that their mental health had been negatively impacted by the budget, citing the closure of the SFI and changes to IHT reliefs as primary concerns.

The EFRA Committee supports the government's objective to reform APR and BPR to prevent tax avoidance by wealthy investors but emphasizes the importance of a more considered approach. They advocate for stakeholder consultation and the exploration of alternative measures, such as the "clawback" mechanism proposed by the Country Land and Business Association (CLA), which would maintain current reliefs but impose tax if assets are sold within a specified period after inheritance.

The government maintains that the proposed reforms are essential for funding public services and asserts that three-quarters of estates will remain unaffected by IHT. However, the EFRA Committee urges the government to rebuild trust with the farming community through transparent communication and inclusive policy development.