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The government has revised its plans to tax inherited farmland, raising the threshold for the tax from £1 million to £2.5 million. This adjustment comes after widespread protests from farmers and concerns expressed by some Labour backbenchers. Originally announced in last year’s Budget, the government intended to introduce a 20% tax on inherited agricultural assets exceeding £1 million, which would end a 100% tax relief that had been in place since the 1980s. The new tax was scheduled to take effect from April 2026.
Environment Secretary Emma Reynolds released a statement after Parliament had adjourned for Christmas, emphasizing the government’s response to feedback from farmers across the country. She said, “We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms.” Reynolds added, “It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities.” Tom Bradshaw, head of the National Farmers’ Union, welcomed the revision, describing it as a measure that “takes out many family farms from the eye of a pernicious storm.”
Despite these changes, some voices remain cautious about the impact of the new policy. Gavin Lane, president of the Country Land and Business Association, acknowledged the government’s willingness to reconsider but warned that “this announcement only limits the damage – it doesn’t eradicate it entirely.” He pointed out that many family businesses might still face the tax burden due to the value of their land and machinery, despite operating on narrow profit margins. Farmer Ben Ardern from Derbyshire called the move “a step in the right direction” but urged the government to exempt family farms entirely, stating, “The big corporations who have just buried money into land – they’re not farmers, they have just done it to avoid tax. Farmers haven’t bought land to avoid tax, we’ve bought land to farm it and grow food.”
Since the initial announcement over a year ago, farmers have frequently protested outside Parliament, alongside unrest among some Labour MPs representing rural constituencies. During a recent parliamentary vote on the tax proposal, a dozen Labour backbenchers abstained, and Markus Campbell-Savours even voted against it. Campbell-Savours was suspended from the Labour Party for breaking ranks and now sits as an independent MP. Opposition voices from other parties have also criticized the tax. Conservative leader Kemi Badenoch said, “This fight isn’t finished,” while Liberal Democrat Tim Farron labeled the situation “utterly inexcusable,” urging the government to scrap the tax altogether. Reform UK deputy leader Richard Tice called the revised policy a “cynical climbdown” and insisted the government must “go further and abolish this callous farms tax.”
In her first Budget of 2024, Chancellor Rachel Reeves had announced the removal of the 100% inheritance tax relief on agricultural assets, a relief that had been in place for decades. This change was projected to raise around £520 million per year by 2029 by taxing inherited farmland valued over £1 million at 20%, which is half the standard inheritance tax rate. The government argued the reform would protect smaller farms from wealthy investors using farmland to shelter wealth from taxes. However, the new concession raising the threshold to £2.5 million, alongside an exemption allowing spouses to pass assets tax-free, effectively allows a couple to transfer up to £5 million in qualifying agricultural assets without incurring inheritance tax. Additionally, assets above the threshold will receive a 50% relief. Estimates suggest the number of estates liable for additional inheritance tax would fall from roughly 2,000 to about 1,100 under the revised terms.
This policy reversal marks another significant U-turn by the government since its election in July 2024, following earlier retreats on other financial policies including cuts to winter fuel payments and welfare spending reductions
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