Lords raise alarm over farm IHT reforms as judicial review is fast-tracked

Mounting pressure is building on the government over its farm inheritance tax reforms, as peers warn the changes could trigger serious cashflow problems for farming families and force the sale of land and businesses.

The House of Lords Economic Affairs Finance Bill Sub-Committee has published its report on the government’s Draft Finance Bill 2025–26, raising concerns about how changes to agricultural and business property reliefs (APR and BPR) will operate in practice.

The report lands as the High Court grants an urgent hearing for a judicial review into the APR and BPR reforms, which are due to take effect from April 2026.

The legal challenge follows amendments made to the controversial proposals in December 2025 and has been fast-tracked to a rare two-day “rolled-up” hearing.

The court will consider both permission to bring the claim and its substantive merits, with the outcome potentially delaying or reshaping the reforms.

Peers said administration is likely to become more complex for estates with qualifying APR and BPR assets, with valuations taking on greater importance and tighter deadlines increasing pressure on families.

Liquidity concerns featured repeatedly in evidence, particularly for farms and rural businesses that are asset-rich but cash-poor.

The committee heard that even where inheritance tax can be paid by instalments, the interaction between valuation complexity, probate sequencing and the six-month payment deadline creates a real risk of financial stress.

Witnesses warned that this could force farms to sell land, buildings or other productive assets to fund inheritance tax liabilities, undermining long-term investment and business continuity.

The inquiry also highlighted concerns about succession planning, with peers warning that the reforms risk creating a generational divide within the farming sector.

While younger farmers may have time to adapt and restructure their affairs, older and more vulnerable landowners face limited options, particularly because anti-forestalling provisions restrict their ability to use existing lifetime gifting reliefs.

To ease these pressures, the committee recommends extending the inheritance tax payment deadline to 12 months for estates with qualifying APR and BPR assets.

Peers also urge the government to monitor the cumulative impact of the reforms over a seven-year period, with particular attention on how they affect farmers, family businesses and long-term succession planning.

The report raises further concerns about how the death of a key individual can distort the valuation of a farm or business for inheritance tax purposes, calling on ministers to examine whether the rules properly reflect that reality.

Although the government says the reforms are intended to modernise inheritance tax and improve fairness, the committee is critical of how the changes were developed, pointing to repeated late amendments following narrow and late-stage consultation.

Lord Liddle, chair of the Finance Bill Sub-Committee, said: “Our inquiry focused on how the government plans to implement these inheritance tax changes.”

He added: “While we were pleased to see the changes the government made to these measures at Budget 2025, which address some of our concerns, significant work remains to ensure that these changes work in practice for personal representatives, businesses, and farms.”

Lord Liddle said the committee was “particularly concerned” about the impact on those administering estates during periods of grief, warning that poor implementation risked “avoidable anxiety and costs” for those affected early on”, leading to “avoidable anxiety and costs”.