The government has reversed its decision to expand inheritance tax to include farms, following strong opposition from farmers who argued it would hinder passing down farms to their children. The change in policy comes after months of farmer protests and concerns raised by some Labour backbenchers.
In the previous year’s Budget announcement, ministers had proposed a 20% tax on inherited agricultural assets exceeding £1 million starting from April 2026. However, in a significant turnaround, the government has now increased the threshold to £2.5 million, with the new regulations set to take effect in April 2026.
This adjustment will lessen the number of farms subject to higher inheritance tax payments, ensuring that only the largest estates are impacted. Environment Secretary Emma Reynolds emphasized the importance of supporting British farming, stating that the revised threshold will exempt couples with estates up to £5 million from inheritance tax.
NFU president Tom Bradshaw expressed relief at the announcement, noting that it will substantially reduce the tax burden for many family farms. He highlighted the unexpected impact of changes to Agriculture Property Relief (APR) and Business Property Relief (BPR) introduced in the previous budget, which caused distress within the farming community.
The Liberal Democrats have urged the government to completely eliminate the perceived unfair tax, arguing that numerous family farms may still struggle financially, barely meeting minimum wage standards.