Ministerial intentions to tax passed-down agricultural land have been significantly revised, with the originally announced threshold increasing from £1m to £2.5m.
This policy shift follows an extended period of campaigns by farmers and concern from some Labour MPs.
Background
At last year's Budget, the Chancellor stated they would start applying a one-fifth levy on passed-on agricultural assets worth more than £1m from the 2026 tax year.
In her first Budget in 2024, Finance Minister Rachel Reeves announced she would be scrapping the favourable treatment on farmland that had been in place since the 1980s.
The policy would have seen passed-down farmland worth over £1m taxed at 20%, 50% of the standard inheritance tax rate, yielding an estimated £520m annually by 2029.
Government Statement
"We have listened closely to the farming community across the country and we are introducing modifications today to protect more typical family farms."
"It's only right that bigger holdings shoulder more of the burden, while we stand by the farms and trading businesses that are the backbone of Britain's farming areas."
Industry Reaction
The Leader of the National Farmers' Union applauded the change, saying it "exempts many family farms from the path of damaging tax."
The Spokesperson of the Country Land and Business Association said: "The government deserves credit for identifying the flaws in the initial plan and changing course."
He continued, "However, this revision only reduces the harm - it doesn't eliminate it entirely. Many family businesses will own enough high-value equipment and land to be assessed above the limit, yet still operate on such thin returns that this levy remains unaffordable."
Political Fallout
In the 14 months since the first announcement, there have been ongoing protests by farmers close to Parliament.
Some Labour MPs in the countryside have also expressed concern. At a recent parliamentary vote on the plan, a dozen backbenchers withheld their support and one opposed the measure.
The Conservative leader said on a social platform: "This fight isn't finished. Other family businesses are still impacted by Labour's tax grab, and we will keep pushing until the tax is removed from them too."
A opposition party spokesperson argued: "It is totally unforgivable that family farmers have been put through over a year of uncertainty and anguish since the government first floated these changes."
The Reform UK spokesperson stated: "This cynical U-turn - whilst better than nothing - does little to address the year of worry that farmers have faced... with British agriculture under severe pressure, the government must go further and scrap this damaging agricultural levy."
Updated Policy
The government had contended that the original measure would safeguard smaller farms while preventing large estates from buying farmland as a tax loophole.
But, it has now rowed back from the initial plan lifting the tax-free amount to £2.5m.
Alongside an allowance which allows farmers to pass on assets to their husbands or wives tax-free, this new policy adjustment means a couple could pass on up to £5m in qualifying assets.
