UK farmers inheritance tax U‑turn raises threshold

Published: 24 December 2025. The English Chronicle Desk. The English Chronicle Online.

The UK government announced a major change to inheritance tax rules affecting family farms just days before Christmas, a decision sparking fresh controversy and deep political debate. Ministers revealed that the threshold at which farmers must pay inheritance tax on agricultural land will be raised from £1 million to £2.5 million, allowing spouses or civil partners to transfer up to £5 million in qualifying assets without tax. This policy shift follows sustained protests by farmers, rural MPs and campaigners, and represents a significant retreat from earlier plans first unveiled in last year’s budget.

The timing of the announcement drew particular criticism from Conservative politicians, who accused the government of seeking to avoid parliamentary scrutiny by releasing the news in the festive lull before Christmas. Shadow environment secretary Victoria Atkins questioned why the Environment Secretary, rather than the Chancellor, had delivered the update and argued that such an important change deserved full debate in the Commons. Opponents also said the last‑minute move suggested ministers hoped to limit public exposure to opposition.

Labour’s original proposal, introduced by Chancellor Rachel Reeves, would have seen a 20 per cent inheritance tax applied to agricultural assets above £1 million when the changes take effect in April 2026. That plan generated intense opposition from the farming community, triggering months of protests in Westminster and rural constituencies, where tractors regularly lined roads and demonstrators voiced fears about the future of family farms.

Pressure also mounted within Labour’s own ranks, with some backbench MPs from rural areas warning that the policy could cost them politically at the ballot box. Reports even emerged of farms at risk of being lost to inheritance tax bills, driving alarms about rural livelihoods and inter‑generational farming continuity.

Environment Secretary Emma Reynolds, speaking alongside the policy announcement, said the government had listened to concerns and adjusted its approach accordingly. She stressed the importance of protecting family farms, which she described as “central to UK food security and rural community wellbeing”, while maintaining a principle that larger estates should contribute appropriately to public finances.

The revised threshold will reduce the number of estates facing increased inheritance tax bills significantly, officials say. Under the new approach, most farms will avoid paying additional tax, with relief extended to around 85 per cent of estates qualifying under agricultural property relief. Still, the change is expected to lower anticipated government revenue from about £430 million to roughly £300 million annually, though exact fiscal details have not been fully released.

Farmers’ groups reacted with relief to the news, with the National Farmers’ Union describing the adjustment as a “huge relief” after months of campaigning. Many in the sector said they welcomed the policy shift but argued that the watered‑down measures did not fully address long‑standing concerns about rural tax burdens and the viability of passing farms between generations.

Political reaction was swift and divided. While Labour leaders defended the recalibrated policy as a responsible response to widespread concern, Conservative figures said it did not go far enough and called for a complete repeal of the inheritance tax change. The Liberal Democrats and other parties also weighed in, some arguing that the government’s climbdown still left too many farms vulnerable to financial strain.

Critics of the revised policy argue that even the higher threshold may still leave some medium‑sized farms exposed to tax liabilities they cannot easily meet, forcing sales or restructuring that could disrupt rural economies. Others warned that the timing and communication strategy around the announcement undermined transparency in public policymaking.

Despite the political heat, the government insists the adjustment balances the need to modernise the inheritance tax system with safeguarding Britain’s rural heritage. The changes will be introduced in the Finance Bill early next year and are set to take effect from April 6, 2026, providing some respite to farming families concerned about the future.

As the debate continues into the New Year, both supporters and opponents of the policy will be watching how the revised rules play out in practice for agricultural communities across the UK. Whether this compromise will satisfy the farming sector or fuel further calls for reform remains to be seen.