The administration scales back inheritance tax proposal for family farms
Treasury proposals to levy a charge on inherited farming assets have been significantly revised, with the proposed exemption limit increasing from £1m to £2.5m.
This concession is a response to months of campaigns by agricultural workers and disquiet from some governing party MPs.
Background
At last year's financial statement, ministers stated they would start introducing a inheritance charge on inherited agricultural assets worth more than £1m from April 2026.
In her first fiscal event in 2024, Chancellor Rachel Reeves stated she would be reversing the favourable treatment on farmland that had been in place since the 1980s.
The move would have seen inherited agricultural assets worth over £1m taxed at 20%, 50% of the standard inheritance tax rate, yielding an estimated £520m annually by 2029.
Ministerial Comments
"We have listened closely to farmers across the country and we are making changes today to protect more typical family farms."
"It's only right that larger estates contribute more, while we back the agricultural enterprises that are the lifeblood of Britain's rural communities."
Industry Reaction
The Leader of the National Farmers' Union applauded the change, commenting it "takes out many family farms from the threat of harmful storm."
The Spokesperson of the Country Land and Business Association said: "The government should be commended for acknowledging the shortcomings in the initial plan and adjusting its approach."
He continued, "That said, this announcement only limits the damage - it doesn't eradicate it totally. Many family businesses will own enough costly assets and land to be valued above the limit, yet still operate on such thin profit margins that this charge remains crippling."
Cross-Party Response
In the 14 months since the initial proposal, there have been regular demonstrations by farmers close to Parliament.
Some governing party politicians in farming constituencies have also voiced unease. At a recent legislative vote on the plan, a twelve backbenchers did not vote and one opposed the measure.
The Conservative leader commented on social media: "This campaign isn't done. Other family businesses are still impacted by Labour's levy, and we will keep pushing until the tax is removed from them too."
A Liberal Democrat MP said: "It is totally unforgivable that family farmers have been put through over a year of uncertainty and distress since the government first announced these plans."
The political party spokesperson said: "This last-minute U-turn - whilst an improvement - does little to address the year of worry that farmers have faced... with British agriculture under severe pressure, the government must go further and abolish this callous farms tax."
Updated Policy
The government had argued that the original measure would help smaller farms while deterring the very rich from buying farmland as a tax loophole.
However, it has now stepped back from the initial plan increasing the threshold level to £2.5m.
Combined with an provision which allows farmers to pass on assets to their partners tax-free, this new government concession means a partnership could pass on up to £5m in qualifying assets.
