Government waters down inheritance tax changes for farmers

Government plans to tax inherited farmland have been watered down following months of protests by farmers and concern from backbenchers.

The individual threshold for a 20% tax on inherited agricultural or business assets will be increased from £1 million to £2.5 million when introduced in April next year.

It comes after more than 20 Labour MPs from mostly rural constituencies abstained on the proposal in Parliament earlier this month, with Penrith and Solway MP Markus Campbell-Savours losing the party whip for voting against.

The increased threshold will halve the number of estates affected by the reform to the Agricultural Property Relief (APR), from 375 to 185.

Environment Secretary Emma Reynolds said: “Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming.

“We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms. We are increasing the individual threshold from £1 million to £2.5 million which means couples with estates of up to £5 million will now pay no inheritance tax on their estates.

“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.”

‘Reform will give peace of mind to farming families’

Chair of the Labour Rural Research Group and MP for Suffolk Coastal has welcomed the changes and said they represent a major boost for family farms and rural businesses.

She said: “This is a crucial reform that will give real peace of mind to farming families.

“By increasing the APR threshold to £2.5 million per person, we are recognising the true value of agricultural in rural Britain, and the importance of keeping farms in family ownership.

“For couples, the combined threshold of £5 million will make a transformative difference. It means fewer families facing impossible choices, and greater certainty that farms can continue to operate, invest, and contribute to our rural economy.

“This wouldn’t have been possible if the Government hadn’t listened to rural Labour MP colleagues in the Labour Rural Research Group, to farmers, and to industry. This move shows the government is fully committed to backing working farms and our countryside  – after years of successive failures under the Conservative government that brought farming to its knees.

“This is a big step that will go a huge way to back Britain’s working farms, whilst the government takes forward wider recommendations in Baroness Batters’ Farming Profitability Review.”

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NFU President: ‘Common sense has prevailed’

The National Farmers’ Union (NFU), which fought a campaign against the changes to inheritance tax for farmers, said that the increase in thresholds would come as a “huge relief to many”.

NFU President Tom Bradshaw said: “While there is still tax to pay, this will greatly reduce that tax burden for many family farms, those working people of the countryside.

“I am thankful common sense has prevailed and government has listened. I have had two very constructive meetings with Prime Minister Sir Keir Starmer and dozens of conversations with Defra Secretary of State Emma Reynolds. She has played a key role underlining the human impact of this tax. These conversations have led to today’s changes which were so desperately needed. 

“From the start the government said it was trying to protect the family farm and the change announced today brings this much closer to reality for many. I’d like to thank the Prime Minister for recognising the policy needed amending and the Chancellor for bringing in the spousal transfer in the Budget. Combined this is a significant change.

“I would like to thank all those Labour backbench MPs that were contacted by farmers and growers and decided to stand by their constituents as demonstrated by the recent abstentions on the vote on Budget Resolution 50. 

“While small in number, it was a significant and brave move for many. We have spent the past year working with them and there’s no doubt their interventions behind the scenes have also played a huge role in securing today’s news. I would also like to thank all opposition parties for continuously raising the impacts of this proposed policy.”

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