In a significant policy adjustment, the UK government has decided to modify its previously proposed inheritance tax plan for farms, increasing the threshold for taxable agricultural assets from £1 million to £2.5 million. This revision comes after considerable protest from farmers and unease among political figures, particularly within the Labour party. The original plan, announced in the 2024 Budget, aimed at imposing a 20% tax on inherited farmland valued above £1 million beginning in April 2026. This change represented a major shift from a long-standing policy of 100% tax relief that had been in effect since the 1980s.
The announcement was made by Environment Secretary Emma Reynolds just after members of Parliament had departed for their Christmas break. She emphasized that the government had taken farmers’ concerns seriously and altered the policy to safeguard the interests of smaller family farms. Reynolds stated, “It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities.”
Following this announcement, Tom Bradshaw, the head of the National Farmers’ Union, expressed his approval of the change on BBC Radio 5 Live, noting that it exempted many family farms from what he termed “a pernicious storm.” Similarly, Gavin Lane, president of the Country Land and Business Association, lauded the government’s recognition of flaws in the initial proposal, though he cautioned that the amendment still left many family-run businesses vulnerable due to their high asset valuations.
A Derbyshire farmer named Ben Ardern emphasized that while the revision was a positive step, the government should eliminate the tax altogether for family-operated farms. He asserted that wealthier investors, who purchase land merely as an investment strategy, should bear the tax burden instead of dedicated farmers who rely on their land for sustenance and production.
The backdrop of this policy shift has been marked by fervent protests from agricultural workers, with demonstrations frequently occurring outside Parliament throughout the initial 14 months following the original tax proposal. Resistance also arose within the Labour party itself, as certain MPs from rural districts expressed frustration at the government’s approach. One such MP, Markus Campbell-Savours, who voted against the proposed tax plan, faced suspension from the party for his dissent.
The Conservative leader Kemi Badenoch remarked on social media that the fight against the inheritance tax was not over, pointing out that other family businesses are still impacted by what she termed a “tax raid.” Responding to the ongoing tension, Liberal Democrat spokesperson Tim Farron criticized the government for a prolonged period of uncertainty faced by farmers since the tax changes were first suggested and promised to submit amendments in the upcoming year to address these concerns.
The new proposal seeks not only to raise the threshold but also includes a provision that allows couples to pass on agricultural assets valued up to £5 million tax-free, effectively providing a substantial buffer for family farms. Furthermore, for estates exceeding the threshold, a 50% relief on the remaining value has been established. According to government estimates, the number of estates subject to inheritance tax under the revised plan will decrease significantly, from approximately 2,000 to about 1,100.
This latest development is part of a series of significant reversals by the government since taking office in July 2024, including earlier adjustments to proposed cuts on winter fuel payments and welfare expenditures. The Chancellor of the Exchequer, Rachel Reeves, had initially introduced the inheritance tax changes with the intent to protect smaller farms while clamping down on larger investors exploiting tax loopholes. However, as the government navigates mounting pressure from various sectors, it remains uncertain how the agricultural community will respond moving forward and what further adjustments, if any, may be warranted.
