The Government has reversed its decision to expand inheritance tax to farms, following strong opposition from farmers concerned about the impact on passing down their farms to their children. This change in policy comes after months of protests by farmers and pressure from some Labour backbenchers.
During last year’s Budget announcement, ministers revealed plans to implement a 20% tax on inherited agricultural assets valued over £1 million starting in April 2026. However, in response to feedback and concerns, the Government has now announced an adjustment, raising the threshold from £1 million to £2.5 million. The updated regulations are set to take effect in April 2026.
By raising the threshold, the number of farms subject to higher inheritance tax payments will be significantly reduced, with only the largest estates being impacted.
Environment Secretary Emma Reynolds emphasized the importance of supporting British farming, stating, “Farmers play a crucial role in our food security and environmental sustainability. We have heeded the concerns of farmers nationwide and are implementing changes to safeguard more traditional family farms.”
Reynolds added, “The individual threshold is being increased from £1 million to £2.5 million, meaning couples with estates up to £5 million will now be exempt from inheritance tax. It is equitable for larger estates to contribute more, while we prioritize the support for farms and businesses that form the foundation of rural communities in Britain.”
NFU president Tom Bradshaw welcomed the announcement, stating that it would bring significant relief to many and alleviate the tax burden for numerous family farms. He expressed gratitude for the government’s reconsideration in response to the challenges faced by the farming community.
The Liberal Democrats have urged the Government to completely eliminate the “unfair tax,” noting that many family farms may still struggle financially and face difficulties in sustaining their operations.