Orkney and Shetland MP, Alistair Carmichael has warned that improvements to the government’s policy on farm inheritance tax do not go far enough and called for an impact assessment of the changes to be made public.
The UK government announced last month that it will increase the inheritance tax threshold for Agricultural and Business Property Relief from £1 million to £2.5 million when it is introduced in April 2026.
This allows spouses or civil partners to pass on up to £5m in qualifying agricultural or business assets between them before paying inheritance tax, on top of existing allowances, though single farmers will only be able to make use of the lower threshold.
Parliament
Speaking in parliament yesterday (Monday, January 5), Carmichael welcomed the new inheritance tax reliefs and paid tribute to the farming unions and others who campaigned to make these changes happen.
He stated: “These changes do make this policy better but that is not the same as saying that they make it good.
“It is surely bizarre that in 2026 you can have two farms, both valued at £5m, but one of them passes free of inheritance tax whereas the other has an inheritance tax bill of half a million pounds.”
Carmichael urged the government to publish their impact assessment to inform the public on the reasons that lead to increasing the tax thresholds and give them “confidence that the government has got the figures right this time.”
MPs
Exchequer Secretary to the Treasury, Dan Tomlinson MP responded to Carmichael’s comments, explaining that the figures that the government has published with this change are drawn from actual claims and engagement with Revenue.
According to Tomlinson, the improved inheritance tax reform will now affect only 185 estates per year, which was set to impact up to 275 estates prior to the changes that were announced last month.
He added that “around 85% of all estates claiming APR (Agricultural Property Relief), some with BPR (Business Property Relief), will now not be paying any additional tax” as a result of the improvements.
In response to Tomlinson, Carmichael said: “The changes to farm inheritance tax announced before Christmas are a real step forward, but they have also left many questions unanswered – not just over the disparity in tax for single farmers but also over the harsh terms of the anti-forestalling clause.
“The right approach for the government going forward surely is to engage properly with the farming community to reach a truly equitable outcome.
“We all want a fair tax system and one which encourages family farming for generations to come – but we are some ways away from that outcome yet.”
