The recent decision by the Government to retract plans for the extension of inheritance tax to farms has been met with relief by farmers. The proposal had sparked strong opposition from farmers who argued that it would hinder their ability to pass down their farms to their children. This change in direction comes after months of farmer protests and concerns raised by some Labour backbenchers.
Initially announced during last year’s Budget, the plan was to implement a 20% tax on inherited agricultural assets valued over £1 million starting in April 2026. However, in response to the backlash, the Government has now revised the threshold to £2.5 million, effectively reducing the number of farms subject to higher inheritance tax and focusing on larger estates.
Environment Secretary Emma Reynolds emphasized the importance of supporting British farming and food security. She highlighted that the increased threshold to £2.5 million means that couples with estates up to £5 million will not incur inheritance tax. This adjustment aims to ensure that larger estates bear a greater tax burden while safeguarding ordinary family farms.
NFU president Tom Bradshaw welcomed the announcement, stating that it would provide significant relief to many family farms by alleviating their tax obligations. He expressed gratitude for the Government’s reconsideration, emphasizing the impact of the initial changes on the farming community and the importance of listening to stakeholders.
On the other hand, the Liberal Democrats have called for the complete removal of the inheritance tax on family farms, citing concerns that many farms may still struggle financially despite the revised threshold. They argue that such taxes could severely impact the financial viability of family-owned farms.
Overall, the decision to adjust the inheritance tax threshold for farms has been met with a mix of relief and continued calls for further reforms to support the agricultural sector.