Inheritance Tax

James Murray Excerpts

Wednesday 14th October 2026 Commons Chamber

[The Financial Secretary to the Treasury and Paymaster General (James Murray)]

I thank the shadow Chancellor for delivering a speech for which it was, this time, much clearer when it had ended.

The Opposition motion invites us to speculate on the contents of the Budget. As right hon. and hon. Members will be used to me and my colleagues saying, the Government do not comment on speculation and the Chancellor will deliver his Budget in this House on 28 October. However, I am free to share with the House some of the context in which the Chancellor will take his decisions.

The Budget comes amid unprecedented economic shocks, with conflicts in both the middle east and Europe hitting people here and around the world. However, we are not powerless. That is why we are giving families and businesses breathing space where we can and starting to make the big, long-term changes needed to create good jobs and growth in every postcode. Everything we do at this Budget will be built on fiscal stability. Our fiscal responsibility has been underlined by the IMF this week, and as it made clear, our country is forecast to have the lowest borrowing—that is to say, the smallest deficit—in the G7 from 2029. Our country is demonstrating strong resilience in the face of global challenges, with the joint second-fastest growing economy in the G7 this year.

To deliver good growth in every postcode and to provide breathing space for families and businesses, we must continue to take responsible choices. That is why, as the Prime Minister and the Chancellor have made clear, fiscal discipline will underwrite every promise this Government make to the British people. We will meet our fiscal rules at the Budget later this month with a buffer against uncertainty. We will control borrowing so that we can bring inflation down and reduce long-term pressures on our public finances. That is the right thing to do, because there is nothing progressive about a Government spending £1 in every £10 on debt interest, rather than on the priorities of working people.

This Government inherited public finances that were in a mess and public services that were in crisis. Since the general election, we have put the NHS back on its feet, with the waiting list down by more than 250,000 since the Government came to power. Last year we delivered the highest number of affordable homes in a decade. We are lifting over half a million children out of poverty by scrapping the two-child limit and expanding free school meals. We are investing in Britain’s future, with an additional £120 billion of capital investment across this Parliament, and in Britain’s roads, rail, energy and other infrastructure that is so important to driving growth. Through reforms to how our country works, from planning to pensions and skills, we have helped to create the conditions for private investment to rise by almost 5% since the general election.

We have always been prepared to take the responsible choices to fix the foundations of our economy, repair our broken public services and deliver the investment needed to support growth. That includes driving down waste and driving up efficiency in the public sector, with a 16% reduction in departmental admin budgets by the end of the spending review period. We are reprioritising spending so that taxpayers’ money is spent on their priorities, cancelling digital ID in order to remove VAT from household electricity bills, reprioritising Ministry of Housing, Communities and Local Government spending to help tackle homelessness and bringing the national bus cap down to £2 for 2027, funded by savings from the Department for Energy Security and Net Zero. We are reforming the welfare system through the Milburn and Timms reviews, while tackling welfare fraud and error to save over £14 billion by the end of 2030-31, and we have taken decisions on tax to ensure that we meet our fiscal rules of living within our means.

Our decisions on tax reflect our commitment to sound public finances. We want to make sure that those with broader shoulders make a fair contribution. Although very few people, if any, want to pay more tax, we recognise that only a small proportion of the largest estates pay inheritance tax, and it makes an important contribution to the public finances.

Inheritance tax is forecast to raise almost £15 billion in 2030-31 to help deliver public services, and it is currently payable on around one in 20 estates. Our reforms to agricultural property relief and business property relief, introduced in April of this year, are expected to raise around £300 million per year, while offering substantial protection for family farms and businesses. Through a 100%—

[Alicia Kearns (Rutland and Stamford) (Con)]

I thank the right hon. Gentleman for giving way on this point. He focuses on how much he believes this tax will raise, but what does the impact assessment say about how many businesses will close as a result of this tax?

[James Murray]

The impact assessment, or tax information note, is published alongside the publication of the policy at the Budget.

I want to just make the point that to protect family farms and family businesses, the threshold for the 100% relief goes up to £2.5 million per person, and above that there is a 50% rate, which means an effective inheritance tax rate of up to 20% above that. Furthermore, the repayments can be spread over up to 10 years interest free, so there are substantial protections in place for family farms and family businesses. That 100% relief on the first £2.5 million of qualifying agricultural and business assets means that a couple can pass on up to £5 million of qualifying agricultural and business assets free of inheritance tax between them, in addition to the existing allowances such as the nil rate band. These protections will support family farms as we work with farmers to build a sector that is productive, profitable and resilient for the future.

[Kit Malthouse]

There seems to be a disconnect in the Labour party’s understanding of the situation. Does the Minister not appreciate that the capital value of an enterprise, whether it be a farm or a business, does not necessarily equate to the revenue that it generates? Many family farms and businesses are what they would call lifestyle businesses, where people are happy to sit on what may appear to be a large capital value that yields only a very small revenue amount that will not support the taxes he is trying to levy, and at the same time only just supports a lifestyle that people are willing to tolerate. It is this imbalance that is causing so much anguish.

[James Murray]

I thank the right hon. Gentleman for his question, but the fact that we have a threshold of £2.5 million of qualifying assets over which the 100% relief applies, and that the 50% relief applies in an uncapped manner above that level, means that we are protecting our small family businesses and family farms while making sure that there is a contribution towards the public finances.

[Kit Malthouse]

Let us say that a farm is worth £3 million, ostensibly on land value. That farm might be yielding a net income to a farmer of only £30,000 to £50,000 a year, on which they are surviving. They are willing to live that way because they love living on the farm, it has been in their family for many generations and they feel a sense of stewardship and custodianship, but that revenue is not enough for them to live on and then sustain the tax that the Minister wants to levy.

[James Murray]

Without commenting on individual tax affairs, even if hypothetical, if a farm were worth £3 million, the £2.5 million allowance for the 100% relief would cover a substantial portion of that. That is in addition to the existing nil rate bands and can be transferred between spouses. If that hypothetical farm were passed on via a couple to their descendants, £5 million would be covered.

I want to emphasise that our work as a Government with farmers—who feed the nation, sustain rural communities and help to manage the land that shapes our countryside—ranges from immediate support, including the £65 million emergency package that we announced to help them cope with this summer’s drought, to opening new markets for British produce through trade deals and export opportunities.

[Wendy Morton]

The Minister appears to give the impression that he knows about the farming industry, but how often, if ever, does he actually go out on to a family farm and meet the farmers?

[James Murray]

As the right hon. Lady will know, I have been in a position in the Treasury previously in this Government, and I have had a large number of conversations with people affected by, and worried about, this tax policy. The tax policy introduced in April this year has a £2.5 million threshold for the 100% relief, and we are confident that that balances raising revenue for the public finances with giving the right protection to family farms, which we think is so important.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

I am grateful to the Minister; he is being very generous. If he was a farmer with a relatively small farm—probably pretty marginal at, say, 300 acres and worth about £3 million—would he consider improving his farm and investing in capital to upgrade it, with the expensive kit now necessary to produce any sort of return on the land these days, or would he think, particularly if he was getting on in years, that that money would simply be top-sliced by the Treasury?

[James Murray]

Much like his right hon. Friend the Member for North West Hampshire (Kit Malthouse), the right hon. Gentleman refers to a £3 million farm. Again, that makes me confident that the threshold of £2.5 million for the 100% relief would cover a large proportion of those assets. As I said, that £2.5 million of qualifying assets means that a couple can pass on up to £5 million of qualifying assets, and that is in addition to the other existing nil rate bands. It is a similar point that his right hon. Friend made. The fact is that a £3 million farm would be covered by much of the relief and the nil rate bands.

Our responsible approach to the public finances stands in stark contrast to the approach taken by the Conservatives. In government, they crashed the economy while the shadow Chancellor was in the Treasury, and they left us with billions of pounds of unfunded spending commitments. In opposition, they are showing that they have learned nothing from their general election defeat. They claim their changes to inheritance tax would cost £6 billion and that they know how they would pay for them, but when they say they would make savings to welfare and asylum, no one can believe a word they say when everyone knows the cost of both soared when they were in power. What is more, independent analysis by tax expert Dan Neidle suggests that the true cost of their changes would reach £10.8 billion a year once behavioural effects are taken into account. That is almost double the number the shadow Chancellor has been bandying around.

Let’s face it: with the Conservatives’ policies costing double what they say and their so-called savings failing to materialise, they would either push up borrowing or do what Tories do best: make cuts to schools, prison places and our NHS. Let’s be clear: this policy would fail to help ordinary families across the country. That independent analysis has shown that 90% of the benefit would go to the wealthiest 20% of pensioner households; 40% would go to the wealthiest 5%; and 70% of the benefits would go to households in London and the south-east.

The Conservatives’ policy stands in contrast to the fair decisions that this Government will always take. My right hon. Friend the Chancellor will of course set out any future tax measures in the Budget in two weeks’ time. But let me remind the House of the decisions this Government have already taken to provide breathing space to families and businesses. For families rightly concerned about the cost of energy, we have removed VAT from electricity bills, taking around £45 off the price cap, and that is on top of the £150 removed from bills at the last Budget. For those paying business rates, the Government have introduced a support package worth £4.3 billion, with a further announcement in July taking an extra 20% off bills for pubs, social clubs and live music venues.

These are some of our choices to help families and businesses across the country. Rather than helping ordinary families struggling with the cost of living, the Tories instead are prioritising some of those with the greatest wealth. In a world of difficult choices, they are choosing to direct billions of pounds towards some of those with the largest assets, while everyone else is asked to pick up the bill.

[Chris Vince]

I thank the Minister for giving way; he is always generous with his time. Does the motion not just show that the Conservatives have the wrong priorities? Removing inheritance tax for families when the threshold is £1 million will make no difference to families in my constituency of Harlow. Less than one in 20 families pay inheritance tax. Is it not the right thing to do to tackle the cost of living crisis in the way that he is talking about?

[James Murray]

My hon. Friend makes an important point about politics being about choices and priorities. Indeed, in a world of difficult choices, the Conservatives choose to direct billions of pounds towards some of those with the largest estates, while everyone else is being asked to pick up the bill.

[Robbie Moore (Keighley and Ilkley) (Con)]

I worry that this Labour Government are living in some sort of parallel universe. I met one of my manufacturing businesses in Keighley recently, which employs nearly 250 people. It has already worked out that its business property relief liability over and above the £2.5 million threshold is about £1 million. The advice it received is either to sell plant or machinery to mitigate that liability imposed on it by this Government, or to sell shares in its business. Either way, people are losing control of their business, or losing productivity from having to sell plant or machinery, and that is the result of a choice that has been made by this Labour Government. How can the Minister sit there and describe those as fair choices to the bosses of that business, when up to 250 people are now likely to be exposed to the risk of losing their jobs in my constituency?

[James Murray]

Without commenting on the circumstances of an individual taxpayer, the fact that we have a threshold of £2.5 million before any inheritance tax is due on relevant agricultural or business property assets provides substantial protection for people from those charges. As I said earlier, there is a 50% relief which is uncapped above that level, and payment is allowed over 10 years interest-free. The balance we are striking in the policy that was introduced in April provides protection for family farms and small businesses while ensuring a contribution to the public finances, underscoring our fiscal responsibility, which is so important for better public services and a stable economy.

[Joe Robertson (Isle of Wight East) (Con)]

The Minister is doing so much to protect and help farmers, so is he mystified that they are not queuing up to thank him?

[James Murray]

I was going to say that I thank the hon. Gentleman for his question, but I am not sure it was meant in that tone. Being in government is about taking the right decisions for the future of the country, and I know that when taking decisions in the Treasury, the most important thing to start with is to ensure that fiscal stability and responsibility are the bedrock of all our decisions. If we look at the decisions that we as a Government have taken, and at the commitment of the Chancellor and Prime Minister, no one can be in any doubt that we will never return to the recklessness of the hon. Gentleman’s party in government.

Labour Members know that to provide breathing space for families and businesses, and to fix our economy and country for the long term, fiscal discipline must underwrite every promise we make. That is why we will continue to meet our fiscal rules, with a buffer against uncertainty. We will support good growth in every postcode by getting power out of Westminster, and we will drive investment to boost innovation and create jobs. That is how we will bring back hope across Britain, not through the fantasy economics and unfunded spending commitments of the Conservative party but with a plan to unlock potential in every part of our country, so that wherever someone lives, they and their local community can thrive. I oppose the Opposition motion.

[Madam Deputy Speaker (Caroline Nokes)]

I call the Liberal Democrat spokesperson.