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The Treasury has rejected a request by the Department for Environment, Food and Rural Affairs (Defra) to mitigate the impact of an inheritance tax reform that some believe could seriously damage small farms in the UK. According to Defra sources, the department was not consulted regarding the policy and suggested it should exempt older people, potentially those aged at least 80. From April 2026, farms exceeding £1m in value will face an effective inheritance tax rate of 20% – half the usual rate of 40%.
The National Farmers’ Union has described the reforms as “disastrous” and some farmers have warned that they will devastate the countryside. Since 1984, Agricultural Property Relief (APR) has exempted small family farms from inheritance tax, but 40% of APR payments have gone to just 7% of the wealthiest claimants. The Treasury has claimed that the change is essential for fiscal sustainability, given a public services funding gap of £22bn.
Some critics of the plans have claimed that the chancellor is underestimating the effect the proposals could have on Labour’s credibility in rural areas. Others have argued that the change is a small money-spinner and that it is, therefore, creating unnecessary conflict. The reforms could provide £560m in revenue.
The policy has also sparked concerns over disputed data. The Treasury claims that the measures will affect 28% of estates. Defra, however, warns that the “real” figure is 66%. On Tuesday, a rally against the proposals will take place in Whitehall, and a central London protest on the issue is also planned by the Farming Forum
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