Farmers Celebrate as Inheritance Tax Hike is Softened: A Win for Family Farms

The UK government has significantly revised its inheritance tax proposals affecting farmland, increasing the threshold from £1 million to £2.5 million following months of protests from farmers and opposition concerns. Initially announced in the 2024 Budget, the plan aimed to tax inherited agricultural assets over £1 million at a rate of 20%, thereby removing the 100% tax relief that had existed since the 1980s. This move sparked widespread backlash among rural communities, prompting Environment Secretary Emma Reynolds to announce the change, stating the government aims to protect ordinary family farms, while ensuring that larger estates contribute more to the tax system.

Leaders from the National Farmers’ Union and the Country Land and Business Association expressed approval of the revised policy, which they argue alleviates tax pressure on many family-run operations. Gavin Lane, president of the CLA, acknowledged it as recognition of the original policy’s flaws. However, challenges remain for farms facing narrow profit margins despite owning assets valued above the new tax threshold.

Farmers and politicians, including Labour MP John Whitby, have celebrated the government’s decision, while others criticized the timing and transparency of the amendments, noting that some MPs were recently forced to vote in favor of the original proposal. Conservative leader Kemi Badenoch and the Liberal Democrats have both called for a complete abolition of the proposed tax, similar to sentiments expressed by Reform UK’s deputy leader Richard Tice, who pointed out that many farmers have endured prolonged uncertainty over their livelihoods.

The latest revisions will lessen the number of estates liable for tax from an estimated 2,000 to 1,100 by 2026. The government, while confirming that no plans exist to completely scrap the new tax policy, insists it still intends to address the interests of smaller farms and ensure equitable contributions from wealthier estates. Treasury sources acknowledged that adjusting the thresholds at a cost of £130 million indicates their commitment to tax reform, while smaller farms receive necessary support.