Many farmers ‘wrong’ about inheritance tax change, Environment Secretary says

Many farmers protesting over changes to inheritance tax are “wrong” about the policy, the Environment Secretary has said.

Steve Reed rejected claims that the Government has underestimated how many will be affected by plans to limit 100% property relief to the first £1 million of agricultural assets.

The remarks are likely to anger some farmers who have been taking part in large-scale demonstrations in central London to urge the Government to reverse the policy announced in the October Budget.

Ministers say the vast majority of farms will not be hit by the changes, but many in the sector have said they will be forced to sell off land to meet the costs.

Appearing before MPs on the Environment, Food and Rural Affairs (Efra) committee on Tuesday as thousands of farmers marched on Westminster demanding a U-turn, Mr Reed was pressed on the backlash.

Chairman Alistair Carmichael said there were “a lot more than 500 (farmers) here saying they’re going to be affected”, and asked whether they were wrong.

Mr Reed replied: “Well, assuming these projections from HMRC, validated by the OBR and IFS, are correct then many of them, probably happily, are wrong because there are things that they can do to plan their tax affairs as most businesses or asset owners would do to limit their liability.

“The numbers I’ve heard bandied around are enormous and very, very frightening if people were to believe them.”

He acknowledged the changes would be “unsettling” and said he was “listening” to concerns, but that most farmers would not face a hike.

But figures cited by critics are based on Government data on the value of farms “and then people have drawn a straight line to an inheritance tax liability, but you can’t do that, because ownership is much more complex than one person, one farm,” he said.

Speaking to the PA news agency earlier, the Cabinet minister insisted that only a few hundred of the wealthiest estates would be impacted, rather than the tens of thousands claimed by opponents.

“The Government’s been very clear: about 500 farms will be affected and the vast majority of farms will pay nothing more under the new scheme,” he said.

“That figure has been validated now by the independent Office for Budget Responsibility and by the independent financial think tank the IFS.

“There are all sorts of other figures flying around that I don’t recognise.

He dismissed opposition accusations that Labour does not understand the countryside, citing the announcement of £5 billion in the Budget to support sustainable food production in the UK.

“That’s the biggest budget of that kind in our country’s history and it shows that we’re backing farmers,” Mr Reed said.

“We’ve gone further than that as well, £60 million to help farmers affected by flooding, we’re going to cut farmers’ energy bills by setting up GB Energy, we’re going to seek a new trade deal with the European Union so we can get food exports moving across the border again and we’re launching the first-ever cross-government rural crime strategy.”

Under the plans, full inheritance tax relief will be restricted to the first £1 million of combined agricultural and business property relief, above which landowners will pay a rate of 20%, compared with 40% on other estates.

The measure comes into effect in April 2026 and can be paid in instalments over 10 years interest free, the Government has said

It comes on top of other exemptions, so that two people with farmland could pass on up to £3 million without anything being paid, depending on their circumstances.

The Tories have said the Government “broke its promise” before the election not to interfere with agricultural property relief.

Industry leaders have accused Chancellor Rachel Reeves of refusing to engage over the issue.

The question of whether farmers or farming activities should be supported in some other way instead does not alter the case against these unfair and distortionary reliefs

Speaking to journalists in Westminster, National Farmers’ Union president Tom Bradshaw said: “The longer they leave this hanging, the more I start to think it’s vindictive, rather than miscalculated.”

But ministers have argued the revenue is needed to help fix public services and plug a £22 billion fiscal “black hole” left behind by their Tory predecessors which they say only became apparent after they entered government.

Speaking to Sky News’ Politics Hub later on Tuesday, Mr Reed criticised Jeremy Clarkson after the TV presenter suggested the changes would affect 96% of farmers.

“I love Jeremy Clarkson’s show, but I think he’s listening to the wrong data here,” the minister said.

The IFS, which has been calling for reforms to inheritance tax, has backed the Government’s measures.

David Sturrock, senior research economist at the think tank, said: “If we have an inheritance tax it should apply equally across all types of assets.

“Exemptions and reliefs cause unfairness and distort ownership and investment in undesirable ways.

“Inheritance tax relief for agricultural and business assets provides a tax incentive for wealth to be held in these forms and for land to be used for agricultural purposes by those who want to pass on wealth to their heirs.”

Mr Sturrock said that if the Government wanted to boost agricultural production it could do so by explicitly targeting support towards certain activities, which would be “fairer”.

“As with most tax changes, some will lose out,” he said.

“The question of whether farmers or farming activities should be supported in some other way instead does not alter the case against these unfair and distortionary reliefs.”