Treasury plans to tax inherited agricultural land have been significantly revised, with the originally announced exemption limit increasing from £1m to £2.5m.
This policy shift is a response to an extended period of campaigns by farmers and disquiet from some Labour backbenchers.
Initial Announcement
At last year's Budget, the Chancellor stated they would start applying a inheritance charge on inherited farmland and machinery worth more than £1m from April 2026.
In her initial fiscal event in 2024, Chancellor Rachel Reeves declared she would be ending the exemption on farmland that had been in place since the 1980s.
The move would have seen passed-down agricultural assets worth over £1m subject to a levy at 20%, 50% of the standard inheritance tax rate, yielding an projected £520m per year by 2029.
Ministerial Comments
"We have heeded the calls to farmers across the country and we are making changes today to shield more ordinary family farms."
"It's only right that bigger holdings pay a greater share, while we stand by the family-run farms that are the foundation of Britain's farming areas."
Sector Feedback
The President of the National Farmers' Union applauded the change, saying it "takes out many family farms from the path of damaging policy."
The President of the Country Land and Business Association noted: "The government should be commended for identifying the flaws in the first proposal and changing course."
He went on to say, "However, this concession only mitigates the impact - it doesn't eliminate it completely. Many family businesses will own enough costly assets and land to be valued above the limit, yet still operate on such narrow profit margins that this tax burden remains unaffordable."
Political Fallout
In the period since the original plan, there have been frequent protests by farmers near Parliament.
Some Labour MPs in farming constituencies have also expressed concern. At a recent parliamentary vote on the plan, a several backbenchers did not vote and one rebelled.
The Conservative leader commented on a social platform: "This fight isn't finished. Other family businesses are still affected by Labour's tax raid, and we will keep campaigning until the tax is lifted from them too."
A Liberal Democrat MP argued: "It is totally unforgivable that family farmers have been put through over a year of worry and stress since the government first floated these changes."
The Reform UK deputy leader stated: "This calculated U-turn - whilst better than nothing - does little to address the year of concern that farmers have faced... with British agriculture under severe pressure, the government must go further and scrap this damaging farms tax."
Updated Policy
The government had contended that the change would protect smaller farms while deterring large estates from buying farmland as a way to reduce tax.
However, it has now retreated from the original proposal raising the exemption limit to £2.5m.
Alongside an exemption which allows farmers to pass on assets to their partners without incurring tax, this new revised threshold means a married pair could pass on up to £5m in applicable assets.
