Government proposals to impose a duty on passed-down farmland have been substantially altered, with the originally announced tax-free allowance increasing from £1m to £2.5m.
This rethink is a response to months of campaigns by the farming community and unease from some governing party MPs.
Background
At last year's Budget, ministers announced they would start applying a one-fifth levy on inherited farming businesses worth more than £1m from April 2026.
In her first fiscal event in 2024, Chancellor Rachel Reeves stated she would be reversing the exemption on agricultural assets that had been in place since the 1980s.
The move would have seen inherited agricultural assets worth over £1m subject to a levy at 20%, half the standard inheritance tax rate, raising an estimated £520m per year by 2029.
Ministerial Comments
"We have listened closely to the farming community across the country and we are introducing modifications today to shield more everyday family farms."
"It's only fair that bigger holdings contribute more, while we back the agricultural enterprises that are the foundation of Britain's countryside."
Industry Reaction
The President of the National Farmers' Union welcomed the revision, stating it "exempts many family farms from the threat of harmful storm."
The President of the Country Land and Business Association said: "The government is to be praised for acknowledging the flaws in the first proposal and revising its stance."
He continued, "That said, this concession only reduces the harm - it doesn't eradicate it entirely. Many family businesses will own enough expensive machinery and land to be assessed above the limit, yet still operate on such small returns that this levy remains unaffordable."
Cross-Party Response
In the year-plus since the original plan, there have been ongoing rallies by farmers close to Parliament.
Some backbenchers in farming constituencies have also expressed concern. At a recent division in the Commons on the plan, a dozen backbenchers abstained and one opposed the measure.
The opposition leader commented on social media: "This campaign isn't done. Other family businesses are still harmed by Labour's tax grab, and we will keep pushing until the tax is lifted from them too."
A Liberal Democrat spokesperson stated: "It is totally unforgivable that family farmers have been put through over a year of anxiety and stress since the government first proposed these changes."
The Reform UK deputy leader said: "This last-minute concession - whilst a step forward - does little to address the year of worry that farmers have faced... with British agriculture hanging by a thread, the government must go further and scrap this unfair agricultural levy."
New Terms
The government had contended that the original measure would help smaller farms while stopping wealthy investors from buying farmland as a tax avoidance scheme.
Yet, it has now stepped back from the first announcement increasing the threshold level to £2.5m.
Combined with an exemption which allows farmers to pass on assets to their partners without incurring tax, this new policy adjustment means a partnership could pass on up to £5m in qualifying assets.
