MPs to open investigation into impact of Labour's inheritance tax changes for farmers

This will include issues such as food security, farming and countryside programmes like Environmental Land Management schemes and the profitability of farming.

But the first evidence session, held by MPs next week, will study the changes announced in the Budget to Agricultural Property Relief (APR) and Business Property Relief (BPR).

From now on farmers could pay an effective rate of 20 per cent inheritance tax on assets over £1 million.

Previously, farmers were exempt from inheritance tax to allow family farms to be passed down through the generations.

They have claimed that the measures will force them to sell off land to pay inheritance tax bills.

In particular, the EFRA Committee - which includes Bridlington and the Wolds MP Charlie Dewhirst - will assess the number of farmers that will be impacted by the policy.

Committee chair, Alistair Carmichael, said: “Since the announcement in the Budget about the changes to APR, there has been an enormous amount of concern amongst the farming community that the viability and future of their farms are at risk.

“The number of farms that will be affected has been disputed between different groups, and in our evidence session next week I hope that we might shed some light on the predicted figures.

“For this debate to move on we need to understand the basis of competing claims and that is a job for which the select committee is ideally suited.”

Industry groups like the Country Land and Business Association and National Farmers’ Union have disputed the figures provided by the Government.

The Treasury has maintained that 27 per cent of claimants of APR will be impacted, however The Yorkshire Post understands this includes all rural landowners, such as people with small holdings.

Defra’s most recent figures from the 2022-23 financial year found the average net worth of a farm was £2.2m, while 49 per cent of farms had a net worth of at least £1.5m.

The Chancellor has said that in some cases the threshold could in practice be about £3m, if couples combine their own personal inheritance tax allowances when passing on their land.

While analysis by the CLA suggests a “typical” arable farm of 200 acres (80 hectares), making a profit of £27,300, would face an IHT liability of £435,000.

The farm would have to allocate 159 per cent of its profit each year to cover the tax bill, if spread over 10 years, and may lead those inheriting the land to sell as much as 20 per cent of their farmland, the CLA said.

The CLA’s calculations build upon warnings from the NFU, which has estimated that 75 per cent of food production in the UK could be within the scope of Ms Reeves’ changes.

The EFRA Committee will take evidence from NFU President Tom Bradshaw and CLA President Victoria Vyvyan, as well as tax experts.

Mr Carmichael added: “During this Parliament, the Government will make major decisions on the environment, farming, food security and rural communities that will affect us all.

“Through our future of farming inquiry, our committee will examine the realities of the issues that farming communities and the agricultural sector are facing.”