Rural MPs in Devon have vowed to continue to campaign against the introduction of the so-called family farm tax as a controversial bill proceeded through parliament this week.

The second reading of the Finance Bill, which contains legislation to bring in the tax, was passed by 334 votes to 194 in parliament on Tuesday 16 December.

Conservative and Liberal Democrat MPs in Devon claim it could spell the end for many generational small farms in the county and have called for a government U-turn.

Under the government’s plans, a tax of 20 per cent will be introduced to agricultural assets over £1 million from April 2026 as it makes changes to agricultural property relief inheritance tax rules. The bill still has several stages to go through before it is approved and becomes law.

The Liberal Democrats fear that farmers with high-value land but low incomes will not have the cash reserves to pay a large inheritance tax bill, forcing them to sell their farms, potentially to large corporations.

They voted against the bill along with the Conservatives who said: “Despite Labour previously promising to protect farmers, under government proposals more than 75 per cent of farms across the country will be hit by new inheritance tax laws.

South West Devon Conservative MP Rebecca Smith said Conservatives across the United Kingdom would continue to campaign to get Labour to scrap the family farm and business tax that “will damage British farming and family businesses”.

“I joined fellow Conservative MPs to stop the tax and protect hundreds of thousands of farmers, their families and communities like in South West Devon,” she said.

“Labour must u-turn so the hard-working farmers in South West Devon and around the country can continue to produce the food we eat three times a day.

“I am sure people here and across the country will never forgive them if they destroy the farming industry as this tax will ultimately do,” she added.

Both the Liberal Democrats and Conservatives put forward amendments to the current Finance Bill to challenge the government’s controversial changes but the amendments were lost.

Devon County Council cabinet member for rural affairs Cheryl Cottle-Hunkin (Lib Dem) said she and her colleagues had spent more than a year lobbying, protesting and explaining the devastating impact this family farm tax will have on rural Britain, especially here in Devon, where farming is the backbone of our communities.

“I wanted to believe the government didn’t understand,” she said. “Yet, as time goes on, it is clear that Keir Starmer and his ministers do understand and have chosen to ignore us anyway. They were offered alternatives that would raise revenue, stop land being used as a tax shelter by the wealthy, and protect genuine working farms. All of it was dismissed.”

The government argues the changes make the tax system fairer by ensuring that the wealthiest estates contribute more to public finances.

It says the current uncapped Agricultural Property Relief (APR) and Business Property Relief (BPR) allows multi-millionaires and billionaires to invest in farmland as a tax shelter, effectively avoiding significant inheritance tax liabilities.

It plans to use revenue raised from the tax to fund essential public services.