The government has reversed its decision to expand inheritance tax to include farms, following strong opposition from farmers. The initial proposal, announced during last year’s budget, aimed to impose a 20% tax on inherited agricultural assets valued over £1 million starting in April 2026. However, after facing backlash and protests from farmers and concerns raised by some Labour backbenchers, the government has revised the policy.
In a significant move, the government has announced that the threshold for the tax will now be increased from £1 million to £2.5 million, with the new regulations set to take effect in April 2026. This adjustment is expected to reduce the number of farms subject to higher inheritance tax bills, ensuring that only the largest estates will be impacted.
Environment Secretary Emma Reynolds emphasized the importance of supporting British farming, stating that the changes aim to protect ordinary family farms. By raising the individual threshold to £2.5 million, couples with estates up to £5 million will be exempt from inheritance tax, with a focus on larger estates contributing more while backing essential farms and businesses in rural communities.
NFU president Tom Bradshaw welcomed the government’s decision, noting that it will provide significant relief to many family farms and alleviate the tax burden for them. He expressed gratitude for the government’s responsiveness to the concerns raised by the farming community, highlighting the importance of common sense prevailing in the decision-making process.
Meanwhile, the Liberal Democrats have called for the complete removal of the tax, citing concerns that many family farms could still face financial challenges despite the threshold increase.