New inheritance tax rules under Labour could be delayed to avoid 'unfairness'

An iInheritance tax on farms should be delayed to avoid unfairness, a thinktank has warned. The Institute for Fiscal Studies suggests gifts of land before a certain date could be tax-free so that elderly farmers would not be caught out.

The IFS has said as it warned that Labour Party government changes to agricultural taxes risk treating some landowners unfairly. David Sturrock, senior research economist at the IFS, said: “Current farm owners passing away in the next seven years (but after the new regime comes into force in April 2026) will not have had the opportunity to avoid inheritance tax by making lifetime gifts.

“If the government wished to give current farm owners the same opportunity to avoid inheritance tax as owners of other assets, it could, for example, make lifetime gifts of agricultural property made before a certain future date inheritance tax free, regardless of the timing of the death.”

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Tax expert, Dan Neidle, suggested “a clawback of all inheritance tax relief for a farm if those inheriting farmland sell it within a certain time. In other words, upon a sale, all the [inheritance tax] that was previously exempt suddenly reappears and becomes charged.”

Neidle also proposed the Treasury should raise the inheritance tax cap to around £20m so only the “largest and most sophisticated farm businesses become subject to [it]”. Tim Farron, the Liberal Democrat environment spokesperson, said: “The government hid behind the IFS to try and justify this disastrous policy.

"That very same organisation is now telling them that their own proposals need an overhaul.” Despite the Treasury’s insistence, some Labour MPs still believe the policy will be softened. A Whitehall source said they believed any full U-turn would have happened already, before the farmers’ protest.

But they said that any future mitigation would be more likely at a fiscal event or spending review “when some of the heat has gone out of the issue”.