The government has reversed its decision to expand inheritance tax to include farms, a move that sparked strong opposition from farmers concerned about passing down their farms to their children. This decision comes after months of protests by farmers and criticism from certain Labour backbenchers.
Initially announced at last year’s Budget, the government planned to implement a 20% tax on inherited agricultural assets valued over £1 million starting April 2026. However, in response to the backlash, the government has now raised the threshold to £2.5 million, which will come into effect in April 2026.
This adjustment will significantly decrease the number of farms subject to higher inheritance tax payments, impacting only the largest estates. Environment Secretary Emma Reynolds emphasized the importance of supporting British farming, stating that the increase in the threshold to £2.5 million will exempt couples with estates up to £5 million from inheritance tax.
NFU president Tom Bradshaw welcomed the announcement, noting that it will provide substantial relief to many family farms by reducing their tax burden. He expressed gratitude for the government’s reconsideration after the unexpected changes to Agriculture Property Relief (APR) and Business Property Relief (BPR) in the previous budget.
The Liberal Democrats have urged the government to completely eliminate the perceived unfair tax, as they believe many family farms will still struggle financially and may barely earn the minimum wage.