Pressure is mounting on the government over agricultural inheritance tax reform, with industry experts warning that the changes could cause serious cash flow problems for farmers and force them to sell their land or businesses.
The House of Lords Economy and Finance Bill Sub-Committee has published a report on the Government’s draft Finance Bill 2025-26, raising concerns about how changes to agricultural and business property relief (APR and BPR) will operate in practice.
The report was released as the High Court granted an emergency hearing for a judicial review of the APR and BPR reforms, which are scheduled to come into force from April 2026.
The legal challenge follows amendments made to the controversial proposal in December 2025, which were rushed into an unusual two-day “ensemble” hearing.
The court will consider both permission to file a lawsuit and its substantive merits, and the outcome could delay or change the shape of reform.
Peers said managing estates with eligible APR and BPR assets is likely to be more complex, with increased importance of valuations and tighter deadlines, increasing pressure on families.
Concerns about liquidity have been repeatedly brought into evidence, particularly in asset-rich but cash-poor farms and rural businesses.
The committee heard that even where inheritance tax can be paid in installments, the interplay of valuation complexity, probate order and six-month payment deadline creates a real risk of financial stress.
Witnesses warned that this could force farmers to sell land, buildings and other production assets to cover inheritance tax obligations, hurting long-term investments and business continuity.
The survey also highlighted concerns about succession planning, with peers warning that the reforms risked creating generational disparities within the farming sector.
While younger farmers may have time to adapt and restructure their businesses, older and more vulnerable landowners face limited options, particularly as anti-deforestation provisions limit their ability to take advantage of existing lifetime gift relief schemes.
To alleviate these pressures, the Commission recommends extending the deadline for paying inheritance tax with eligible APR and BPR assets to 12 months.
Peers are also calling on the government to monitor the cumulative impact of the reforms over seven years, paying particular attention to how they impact farmers, family businesses and long-term succession planning.
The report raises further concerns about how the death of a significant individual can distort the valuation of a farm or business for inheritance tax purposes, and asks ministers to consider whether the rules adequately reflect that reality.
Although the government says the reforms aim to modernize and improve the fairness of inheritance tax, the commission was critical of how the reforms were rolled out, noting that they were repeatedly amended late after limited and late-stage consultation.
Lord Liddle, chairman 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 are pleased that the Government has made changes to these measures in Budget 2025, addressing some of our concerns, there is still significant work to do to ensure these changes work in practice for individual representatives, businesses and farms.”
Lord Liddle said the committee was “particularly concerned” about the impact on those managing estates during this time of grieving, and warned that poor implementation risked “early and unavoidable uncertainty and costs” for those affected.
