The government has reversed its decision to expand inheritance tax to include farms, following strong opposition from farmers who feared the impact on passing down their farms to their children. This change came after months of protests by farmers and concerns raised by some Labour backbenchers.
Initially announced at last year’s Budget, the government planned to introduce a 20% tax on inherited agricultural assets exceeding £1 million starting April 2026. However, in response to feedback, the government has now revised the threshold to £2.5 million, which will come into effect in April 2026. This adjustment aims to reduce the number of farms subject to higher inheritance tax and target only the largest estates.
Environment Secretary Emma Reynolds emphasized the importance of supporting British farming, stating that the increased threshold to £2.5 million will exempt couples with estates of up to £5 million from inheritance tax. The government aims to ensure that larger estates contribute proportionally more while safeguarding family farms and trading businesses vital to rural communities.
NFU president Tom Bradshaw welcomed the announcement, noting that the changes would provide significant relief to many family farms by lessening the tax burden. He expressed gratitude for the government’s responsiveness to concerns raised by the farming community, particularly regarding the impact of previous changes to Agricultural Property Relief (APR) and Business Property Relief (BPR).
While the Liberal Democrats urged the government to completely abolish the tax, citing concerns that many family farms may still struggle financially, the revised inheritance tax policy represents a compromise that addresses the immediate challenges faced by farmers.