Welsh MPs have urged the UK Government to pause new inheritance tax rules for farmers until there is a clearer understanding of how they will affect farm families and rural communities.
The cross-bench Welsh Affairs Select Committee criticised the way the changes were introduced, saying ministers have been too relaxed about the possible harm to Welsh agriculture and created confusion about the impact on smaller farms. The committee wants a proper assessment of how the reforms will affect Welsh farmers before they are implemented.
The reforms, which were announced by the Treasury, would mean that agricultural property worth more than £1 million will be taxed at 20 % when passed on at death from April 2026.
Previously, farmland and business assets that qualified for relief were exempt from inheritance tax, enabling many family farms to be passed to the next generation without a bill.
The government has defended the changes, saying that 40% of Agricultural Property Relief – about £219 million – goes to just 117 estates, and that updating the rules will free up money for public services while still supporting investment in farming.
The Welsh Affairs Committee’s report argues that these figures do not tell the whole story, especially for Wales where many farms are small family businesses rather than large estates.
Most Welsh farms are livestock-based and have low annual incomes, so the committee says any tax increase could hit them hard. It also highlights a lack of reliable data on the Welsh farming sector, saying that different organisations have published conflicting estimates on how many farms will be affected. Without clear evidence, the committee says ministers cannot fully understand the consequences of the policy.
The government insists that most farms will not be affected because the reforms are designed to target the wealthiest estates. Official guidance states that almost three-quarters of farms claiming agricultural property relief would still qualify for relief after the changes, based on the latest available data. However, the Welsh Affairs Committee disputes this, saying the evidence is not robust and does not take into account the particular make-up of Welsh agriculture.
Committee chair Ruth Jones MP said the government’s approach had been “complacent” and had failed to address the strong reaction from farmers and rural communities. She emphasised that the committee’s call is not to block the change forever, but to “pause and think” before moving ahead, giving time for a detailed impact assessment to be carried out.
Farmers are unable to gift money to relatives within 7 years because there is little or no cash, instead tied up in land. This could encourage farmers to sell their land if they want to be able to pass on decent inheritance to their children. Others may turn to inheritance tax loans to help cover their pressing tax bills in the interim.
Farmers in Wales have expressed deep concern about the reforms. Kath Whitrow, a sheep farmer and chair of a hill farmers board with the National Farmers Union Cymru, said people in the industry feel anywhere from disappointed and worried to “absolutely terrified” by the prospect of inheritance tax on land that has been in families for generations. She said the idea of a large tax bill looming when passing the farm to the next generation makes many farmers feel uncertain about the future, needing a viable way to bridge the costs during probate.
Whitrow pointed out that her own family farm was bought in 1950 for just £1,860 and is worth ten times that now, but that land value does not always translate into cash flow. She warned that young farmers could lose hope if inheritance tax threatens the family farm, saying that once a farm is lost, “it doesn’t come back,” and that this could undermine food security and rural life in Wales.
The committee’s report also touches on broader issues facing Welsh agriculture, including funding, trade agreements, and support for future generations of farmers. As the UK Budget approaches, the committee hopes ministers will take its recommendations seriously and look again at the proposed inheritance tax changes, particularly in light of the unique nature of farming in Wales.
