Yorkshire to have £1bn wiped from economy due to inheritance tax changes, report finds

The research, commissioned by Family Business UK and conducted by independent consultancy CBI Economics, found the changes could hit Treasury revenue by £1.9bn and wipe £14.9bn from the UK economy.

Almost a quarter of family businesses and almost one in five family farms have cut jobs or paused recruitment since Rachel Reeves’ announcement in the Budget, with almost half pausing or cancelling investment.

The Chancellor’s proposals, which will come in next April, would introduce a 20 per cent inheritance tax rate on agricultural land and businesses worth more than £1m.

This essentially scraps exemptions known as business and agricultural property relief, which meant no tax was paid to pass down farms and other rural firms to family members.

The Government has continued to defend its “fair and balanced approach which helps fix the public services we all rely on”.

The plans have faced intense opposition from the sector, which says cash-poor, asset-rich farmers will be forced to sell their land.

Constituency-level data has now been modelled on the survey, which found that across Yorkshire 16,500 jobs could be lost due to the changes, with a £1bn reduction in gross value added (GVA).

Shadow Farming Minister Robbie Moore said: “The Chancellor’s wholly misguided family farm and business tax continues to be utterly discredited by the facts.

“Yet another report shows the devastating impact on jobs and growth that changes to business and agricultural property relief will have in Yorkshire, and across the country.

“At a time of heightened national security threats, we should be prioritising and supporting domestic food producers, yet whether it's through the family farm tax, the stoppage of the Sustainable Farming Incentive, or the dramatic drop in Basic Payments, this Government will not give farmers a fighting chance.”

Mr Moore, the Keighley and Ilkley MP, said it was “particularly striking” how the report showed urban businesses are also going to be impacted by these changes, including manufacturing firms in his constituency.

Now, the Country Land and Business Association (CLA) has written to more than a dozen Labour MPs across the region with these figures, urging them to push the Government to use a clawback mechanism instead.

This would see tax applied at the full 40 per cent rate on inherited assets sold within a certain time period post-death if the proceeds are not reinvested into farming businesses.

CLA director north Harriet Ranson said: “As this comprehensive report shows, tax revenue will fall, along with hundreds of thousands of jobs lost which underpin our rural economy and society.

“The government’s case is collapsing under increasing evidence that shows these reforms are based on ideology – rather than actual tax take, will inflict lasting damage on farms and family businesses across Yorkshire and beyond.

"It is not too late to protect rural jobs and businesses that contribute to a thriving rural economy whilst still raising money for the Treasury.

“Now is the time to back the ‘clawback’ alternative, and we urge the MPs in Yorkshire we have written to, to stand up for their constituents by working with us and pushing the government to support this position to ensure growth, rather than stagnation, of the rural economy.”

A Government spokesperson said: “Our reforms to agricultural and business property reliefs will mean 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 estates pay, and payments can be spread over 10 years, interest-free.

“This is a fair and balanced approach which helps fix the public services we all rely on.

“Capping the rate of corporation tax, reforming planning, establishing a National Wealth Fund and creating pension megafunds is part of our plan for change to get Britain building, unlock investment and support business so we can raise living standards and make all parts of the country better off.”