The recent decision by the Government to retract its proposal of expanding inheritance tax to include farms has sparked a strong backlash from farmers. Many farmers expressed concerns that the initial plan would hinder their ability to pass down their farms to their children. This reversal comes after months of protests from farmers and concerns raised by certain Labour backbenchers.
During last year’s Budget announcement, ministers revealed intentions to implement a 20% tax on inherited agricultural assets valued over £1 million starting from April 2026. However, in a significant concession, the Government has now disclosed that the threshold will be raised from £1 million to £2.5 million. These updated regulations are set to take effect in April 2026.
The increase in the threshold is expected to reduce the number of farms subject to higher inheritance tax payments, ensuring that only the largest estates will be impacted.
Environment Secretary Emma Reynolds emphasized the importance of supporting British farming for food security and environmental sustainability. She stated, “We have closely listened to farmers nationwide and are implementing changes today to safeguard more typical family farms.”
Reynolds further explained, “By raising the individual threshold from £1 million to £2.5 million, couples with estates worth up to £5 million will no longer incur inheritance tax on their estates. It is fair that larger estates contribute more, while we continue to support the farms and businesses essential to Britain’s rural communities.”
NFU president Tom Bradshaw welcomed the announcement, noting that it will bring significant relief to many family farms by alleviating the tax burden. He expressed gratitude for the reconsideration of the changes, highlighting the adverse impact they initially posed to elderly and vulnerable individuals within the farming community.
The Liberal Democrats have urged the Government to completely eliminate the “unfair tax,” citing concerns that numerous family farms may still struggle financially and barely meet minimum wage standards.