The recent decision by the Government to backtrack on the proposal to expand inheritance tax to include farms has been met with relief by farmers. The initial plan had sparked strong opposition from farmers who feared it would hinder their ability to pass down their farms to their children. This change in direction comes after months of protests from farmers and concerns raised by certain Labour backbenchers.
During last year’s Budget announcement, officials unveiled a proposal to introduce a 20% tax on inherited agricultural assets valued over £1 million starting in April 2026. However, in a significant concession, the Government has now revealed that the threshold will be raised from £1 million to £2.5 million. These revised regulations are set to take effect in April 2026.
By increasing the threshold, the number of farms subject to higher inheritance tax payments will be notably reduced, ensuring that only the largest estates are impacted.
In response to the adjustment, Environment Secretary Emma Reynolds emphasized the vital role of farmers in food security and environmental conservation. She stated, “Farmers are pivotal to our food security and environmental stewardship, and we are committed to collaborating with them to secure a prosperous future for British agriculture. By heeding the feedback from farmers nationwide, we are implementing changes to safeguard more typical family farms.”
Reynolds further explained, “The individual threshold is being raised from £1 million to £2.5 million, which means couples with estates worth up to £5 million will no longer be liable for inheritance tax on their assets. It is equitable for larger estates to contribute more, while we support the farms and businesses that form the foundation of rural communities in Britain.”
NFU president Tom Bradshaw expressed gratitude for the announcement, noting that it would alleviate the tax burden for many family farms. He highlighted the unexpected impact of last year’s budget changes on Agriculture Property Relief (APR) and Business Property Relief (BPR) within the farming community. Bradshaw commended the government for listening and reversing what he described as a detrimental tax measure.
Meanwhile, the Liberal Democrats have urged the Government to completely eliminate the “unfair tax,” pointing out that numerous family farms could still struggle financially and barely meet minimum wage requirements.
