The recent decision by the Government to retract plans for extending inheritance tax to farms has been met with relief by the farming community. The proposed policy had sparked strong opposition from farmers who argued that it would hinder the transfer of farms to their children. The Government’s reversal comes after months of protests from farmers and concerns raised by some Labour backbenchers.
In the previous year’s Budget announcement, ministers had revealed intentions to implement a 20% tax on inherited agricultural assets valued over £1 million starting April 2026. However, in a significant shift, the Government has now raised the threshold to £2.5 million, which will come into effect in April 2026. This adjustment is expected to reduce the number of farms subject to higher inheritance tax payments, focusing primarily on larger estates.
Emma Reynolds, the Environment Secretary, emphasized the vital role of farmers in food security and environmental sustainability. She stated that the government had heeded farmers’ feedback nationwide and made revisions to safeguard more typical family farms. Under the revised threshold, couples with estates up to £5 million will no longer be liable for inheritance tax.
NFU president Tom Bradshaw expressed gratitude for the announcement, noting that it would alleviate the tax burden for numerous family farms. He highlighted the unexpected impact of alterations to Agriculture Property Relief (APR) and Business Property Relief (BPR) introduced in the previous year’s budget, which had caused distress within the farming community.
The Liberal Democrats have urged the Government to completely abolish the perceived unjust tax, citing concerns that many family farms could still face financial hardship, struggling to meet minimum wage standards.