Northumberland Labour MP calls on Government to rethink inheritance tax changes

Speaking in a Westminster Hall debate in Parliament on Monday, David Smith voiced concerns the changes as they are would impact family farms. The Government has previously claimed that “most estates” would not be impacted.

However, critics have insisted it will force farmers to sell up or face huge tax bills, and claimed it would have a devastating impact on the rural economy. Mr Smith said while local farmers did not have an issue with the aims of the policy, there were concerns about their businesses.

He said: “I have held dozens and dozens of conversations with farmers across my constituency of North Northumberland. It has become clear to me that they welcome the principle of this policy, which is to stop the super-wealthy from minimising their tax liabilities by land banking with agricultural land.

“Not one of those farmers told me that they have a problem with the aim of the policy: to stop the wealthy avoiding tax. However, in the same conversations, many of the farmers told me that they are concerned that their businesses will be adversely affected.

“I spoke to one farmer whose land is valued at £16million, so their new inheritance tax liability will be about £2.8 million, but they make just £96,000 profit per year. There are several examples of farmers who have low profits but face enormous bills.”

“I wonder, therefore, if the relief element of the policy could be recalibrated. I have spoken to farmers in my constituency whose farms are worth £5million, £8million, £20million and everything in between.”

Under the proposed changes, from April 2026, inherited agricultural assets worth more than £1million, which were previously exempt, will have to pay inheritance tax at 20%. Mr Smith’s constituency is one of the most rural in the country, while members of Northumberland County Council recently passed a motion calling for the policy to be halted.

Responding on behalf of the Government, the Exchequer Secretary to the Treasury James Murray said: “I am aware of the strength of feeling, both within the room today and outside.

“I understand, as the petition sets out, that there are concerns about the impacts of the reforms to the reliefs, particularly on working farms. I would like to emphasise the fact that the decision to reform agricultural and business property reliefs was not taken lightly.

“It was one of many tough decisions that we had to take at the autumn Budget in 2024, given the incredibly challenging fiscal position we inherited from the previous administration. We have taken those decisions in a way that makes the tax system fairer and more sustainable.

“The reforms to agricultural property relief and business property relief mean that the Government will still maintain significant levels of relief from inheritance tax beyond what is available to others. The Government recognise the role that these reliefs play, particularly in supporting small farms and businesses, and, under our reforms, they will continue to play that role.

“According to the latest data from HMRC, 40% of agricultural property relief benefits the top 7% of estates making claims. Given the wider pressures on the public finances, we do not believe that that is fair or sustainable.”