A Labour civil war is threatening to erupt as Sir Keir Starmer’s own MPs have joined the Tories in criticising government plans for farmers to pay inheritance tax.
The Treasury claims family farms will be protected from its proposal to impose the tax on farms worth more than £1million. Chancellor Rachel Reeves‘ plan has led some farmers to accuse Labour of being out of touch with rural communities.
Andrew McNae, the Labour MP for Rossendale and Darwen, said it was unclear whether farmers would be protected as he addressed a lobby event organised by the National Farmers Union (NFU).
He suggested changes might be required for the controversial plan, which would see an effective tax rate of 20% on assets above the £1m threshold.
Fellow Labour MP, Steve Witherden, who represents Montgomeryshire and Glyndwr, called on the Treasury to make its modelling on the policy’s impact public.
He told the Telegraph backbench MPs would have an opportunity to “feed into” the debate about the changes.
Terry Jermy, Labour MP for South Norfolk, called for reassurances over the scale of the policy’s impact and confirmation the Government’s figures are correct.
Some 27% of estates claiming agricultural property relief (APR) were above the £1m threshold in 2021/2022, according to the Treasury.
This suggests nearly three-quarters of farms would not fall within the scope of the charges. The Treasury says about 500 estates a year are expected to pay inheritance tax under the changes.
But the NFU says farm businesses have also qualified separately for business property relief, which can cover things such as harvested grain and livestock, machinery and diversified businesses such as camping on a farmer’s field.
Now the two are combined, with a single £1m allowance before inheritance tax is levied, more farms could be in scope.
The NFU points to figures from the Environment Department showing 66% of farm businesses in England have a net value of more than £1m.
It maintains that while farms may have a high nominal asset value – the value of their land and business assets – the returns from farming are often very low, so farming families may not have the reserves to pay for inheritance tax liabilities without selling off assets.
However, Environment Secretary Steve Reed has claimed many farmers protesting the changes are wrong about the policy.
He appeared before MPs on the Environment, Food and Rural Affairs committee on Tuesday (November 19) as thousands of farmers marched on Westminster demanding a U-turn.
Mr Reed admitted the changes would be “unsettling” and said he was “listening” to concerns, but insisted most farmers would not face a hike.
The Government has said the change will come into effect in April 2026 and the tax can be paid in instalments over 10 years interest free.
