Peers in the House of Lords have launched an inquiry into controversial inheritance tax reforms that farmers warn could devastate family businesses, forcing some to sell land simply to cover their bills.
The inquiry, carried out by the Finance Bill Sub-Committee, will scrutinise two provisions in the draft Finance Bill: reforms to agricultural property relief and business property relief, and changes concerning unused pension funds and death benefits.
Although the Lords cannot amend Finance Bills, the committee’s findings will be published in a report designed to inform debate when the legislation passes through the Commons later this year.
The Labour government plans to impose a 20% tax on inherited agricultural assets valued over £1 million – half the standard rate – from April 2026.
Critics say the measure risks undermining the ability of families to hand farms down to the next generation. Without full relief, heirs could face inheritance tax bills running into hundreds of thousands of pounds — forcing the break-up or sale of land and assets to cover the cost.
The NFU confirmed it will submit written evidence, warning that the government’s proposals risk causing severe disruption to family farming businesses. It has repeatedly called for a full impact assessment of what it has labelled the “family farm tax”.
The union said it would be “highlighting our deep concerns around the consequences of implementing the family farm tax and the devastating impact this will have on family farms”.
Industry leaders stress that the changes come at a time when farmers are already grappling with soaring input costs, volatile commodity prices and increasing regulation.
Rising energy bills, fertiliser prices and labour shortages have all eroded margins, while uncertainty over future agricultural support schemes has left many businesses struggling to plan for the long term.
Succession planning is another acute challenge: with the average age of UK farmers now over 59, many family farms are preparing to transfer assets to the next generation in the coming years.
Leaders warn that layering new tax liabilities on top of existing pressures risks accelerating farm closures or consolidation, further weakening the rural economy.
In some cases, they argue, farms may be broken up or sold off simply to meet the new tax obligations — undermining not only family livelihoods but also local food production and rural employment.
The inquiry follows mounting concern from independent experts. A report from CenTax (Centre for the Analysis of Taxation) argued that the policy required amendments to achieve the government’s stated aims.
Meanwhile, both the Office for Budget Responsibility and the Environment, Food and Rural Affairs (EFRA) Committee have warned of the potential damage, particularly for elderly and vulnerable farmers.
The Finance Bill Sub-Committee is now seeking written submissions by 7 October. While it cannot consider the level or incidence of tax, it will examine technical questions around the administration, clarity and simplification of the proposals.
