Keir Starmer plans 'devastating' £4 billion inheritance tax raid

The exemptions allow farms and businesses to be passed down without the 40 per cent inheritance tax charge applying.

Removing the two exemptions are expected to raise as much as £4 billion, according to the Times.

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As much as £3.2 billion was saved by business owners and farmers between 2020 and 2021 using the loophole.

But Sean McCann of the financial advice firm NFU Mutual said warned that the changes would have a damaging effect on the UK's family farms.

He said: "Removing Agricultural Property Relief could be devastating for the UK’s traditional family farms.

"Financial returns from agriculture can be lower than many other businesses. Agricultural Property Relief enables farmers to invest in their long-term future with the knowledge their farm is sustainable for the next generation.

"Similarly, removing Business Property Relief would be a significant disincentive to business owners, and is likely to mean that in many cases the next generation would need to borrow significant sums to pay the tax, rather than to invest in future growth and jobs."

This comes amid reports that Rishi Sunak is planning to scrap the tax altogether.

Inheritance tax is paid on estates worth over £325,000.

Discussions are said to be taking place within the Government about changes to the tax at the next manifesto ahead of next year's election.

While Chancellor Jeremy Hunt has said there is no room for tax cuts, Defence Secretary Grant Shapps this week described inheritance tax as "deeply unfair" and "punitive".

He said: "I think it’s a question, for many people, of aspiration, and people know that there’s something deeply unfair about being taxed all their lives and then being taxed in death as well."

An influential backbencher told GB News that the UK is unlikely to see immediate inheritance tax cuts at the Autumn Statement, but they could be included in the manifesto ahead of the next general election - expected to take place next May.

They questioned the urgency of changes to inheritance tax, saying: "I would not myself choose to cut inheritance tax on either of the budgets taking place ahead of the general election.

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"I think there are more urgent priorities affecting people in Britain."

Shapps echoed this, admitting that the Chancellor is in a “fiscal straitjacket”, meaning that any changes are unlikely to feature in November’s Autumn Statement will contain any immediate changes to the way the tax is administered.

He said: "You will certainly have to wait for a Budget or another event, for the government to set out whatever the plans will be.

"Generically, I’m in favour of all taxes being lower, but we’ve got to be fiscally responsible.”