The Government’s changes to inheritance tax rules came under intense scrutiny in the House of Lords on Thursday, as peers raised deep concerns about the impact on rural businesses, farming investment, and mental health in the countryside.
Baroness Rock opened the debate by asking His Majesty’s Government what assessment it had made of the impact of the new inheritance tax reforms on rural businesses and overall economic growth. Drawing on her work with tenant farmers and referencing recent data from the Farmers Guardian and the Tenant Farmers Association, Baroness Rock warned the changes were already “stifling investment.”
According to the survey she cited, 55% of tenant farmers plan to reduce investment, while 25% expect landlords to reclaim land for non-agricultural purposes. Alarmingly, she said that more than half reported declining mental health, fearing eviction and uncertain futures. “I have had many heart-breaking messages from farmers who fear they just cannot go on,” she told the chamber. She urged the Government to consider a recommendation from the Rock Review that would allow landlords letting land for at least eight years to include its value in the zero-rate inheritance tax threshold.
Lord Livermore, the Financial Secretary to the Treasury, defended the Government’s position, stating that despite necessary fiscal tightening, “almost three-quarters of estates claiming agricultural property relief and business property relief will not pay more inheritance tax.” He added that the Office for Budget Responsibility (OBR) does not anticipate a significant macroeconomic effect from the reforms.
Responding to Baroness Rock, Lord Livermore said he appreciated her long-standing work with tenant farmers, but did not “necessarily accept” the conclusions of the survey. He emphasised the Government’s ongoing support for farmers, including a £5 billion investment over two years in sustainable agriculture, and highlighted mental health as a serious issue the Government is addressing through increased NHS staffing.
Baroness Foster of Aghadrumsee raised concerns specific to Northern Ireland, where land values are high and farms are small. She asked whether the Government would assess regional impacts, not just UK-wide averages. Lord Livermore confirmed that a tax information and impact note would be published with the draft legislation and that regional stakeholders, including the Ulster Farmers’ Union, had been consulted.
Baroness Kramer, Treasury spokesperson for the Liberal Democrats, criticised the cumulative impact of inheritance tax reform, delinked farm payments, rising energy costs, trade disruptions, and climate challenges. She called for a comprehensive analysis of the rural economy, beyond just macroeconomic or regional levels. Lord Livermore responded that while he did not accept her “characterisation,” the Government’s upcoming assessments would be thorough.
The Bishop of St Albans proposed the idea of a clawback mechanism, where tax relief could be reversed if land was sold within seven years of death, thereby curbing abuse of the relief system. Lord Livermore said the idea had been considered but would not generate the necessary revenue and could end up benefiting the wealthiest estates disproportionately.
Baroness Butler-Sloss highlighted the high property values in rural Devon, noting that many small farms exceed the £1 million threshold simply through the value of the farmhouse. Lord Livermore clarified that the £1 million limit refers to business and agricultural assets, and that couples could still pass on up to £3 million tax-free, including other exemptions.
In a more pointed remark, Labour peer Lord Foulkes of Cumnock took aim at the farmers’ protests in Whitehall. “When the farmers blocked Whitehall with their tractors – sparkling, new, expensive tractors – they didn’t look very poor,” he said, questioning whether some tax relief advocates were more interested in protecting wealth than rural livelihoods. He also accused the Conservatives of always seeking to “make the rich even richer.”
