Farm Tax Threshold Raised in Major UK Policy Shift After Backlash

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

The UK government has reversed a controversial inheritance tax plan for farmers after sustained national pressure and protests that stretched across the countryside and into central London over many months. Initially introduced in the Autumn Budget of 2024, the proposed reforms would have removed the long‑standing inheritance tax exemption on agricultural land above a threshold of £1m, imposing a 20 percent levy on estates that exceeded that value. Critics from farming communities warned that this would force many family farms to be sold to cover tax bills and make it harder for generations to take on the family business. The government’s late December announcement now raises the threshold at which full relief applies to £2.5m per estate, a dramatic change set to take effect from April 2026 and significantly reduce the number of farms facing inheritance tax.

The shift in policy, quietly unveiled just before Christmas, follows months of growing unrest among rural communities, including large tractor protests in London, heated debates in Parliament, and sustained lobbying from farming unions and Labour MPs representing rural constituencies. Many agricultural stakeholders argued that the initial policy risked undermining the stability of small and medium family farms, which typically operate on narrow margins and depend heavily on passing land to heirs without fear of onerous tax liabilities. With the government’s latest concession, nearly 85 percent of estates claiming agricultural property relief are now expected to avoid paying additional inheritance tax altogether, compared with a lower proportion under the original proposals.

The government’s statement emphasised that the change was a response to “listening closely to farmers and businesses across the country,” acknowledging the special role that farms play in food security and rural life. Environment Secretary Emma Reynolds described the policy shift as a measure that protects ordinary family farms while ensuring that the most valuable estates contribute fairly to the tax system. Married couples and civil partners will be able to combine their allowances to pass on up to £5m in qualifying agricultural or business assets free of inheritance tax, in addition to existing allowances.

Although the revised rules ease the burden for many, they stop short of abolishing inheritance tax for farms entirely, prompting calls from some political parties and industry figures for further reforms. The Liberal Democrats urged ministers to go further and scrap inheritance tax on farms wholly, while Reform UK’s deputy leader hailed the change as a partial victory but called for even broader tax relief. Some Conservative figures also welcomed the revision, framing it as a victory for rural campaigning and a recognition of the contribution farmers make to the national economy.

This policy climbdown marks one of several high‑profile reversals by the Labour government since it came into office, following earlier retreats on welfare cuts and proposed reductions to disability benefits. Supporters of the U‑turn argued that it demonstrated responsiveness to constituent concerns and a willingness to adapt policy when faced with compelling evidence of potential harm. Opponents of the original inheritance tax reform said that the cost of doubling the threshold — an estimated £130 million reduction in expected Treasury revenues — was a small price to pay to safeguard the future of family farms across the UK.

Farming organisations, including the National Farmers’ Union, described the announcement as a huge relief for many families who feared having to sell land to meet tax bills. Union leaders highlighted that the revised threshold will allow farmers to plan for succession with far greater confidence and remove the spectre of financial strain hanging over inheritance decisions. One national leader noted that common sense had prevailed, and the concessions were the result of constructive engagement with government ministers throughout the year.

However, the announcement has not satiated all criticism. Some farmers and commentators believe that inheritance tax should be abolished for agricultural estates altogether, arguing that even the revised threshold leaves certain valuable family farms vulnerable to levies that could threaten their viability. There were also concerns raised about the timing of the announcement during the Christmas recess, with some rural representatives saying that the government chose a quiet news period to release the concession and muted political scrutiny.

Looking ahead to the implementation of the new rules in April 2026, financial advisers stressed that farm owners should seek professional guidance to understand the impact of the changes on their estates. With the combination of agricultural and business property reliefs and the transferable nature of the allowances between spouses, inheritance planning has become more complex yet potentially more advantageous for many families. Tax specialists pointed out that while the relief’s expanded threshold offers significant benefits, other inheritance tax planning tools and exemptions remain essential for a robust succession strategy.

For many in rural Britain, the government’s reversal signals a major win for grassroots activism and cross‑party collaboration. Farmers have long contended that their industry’s unique characteristics require tailored tax solutions that recognise the importance of preserving family farms and rural communities. While debate continues over whether inheritance tax should be fully abolished for agricultural estates, the government’s latest move represents a significant policy shift that will shape the future of farming inheritance for years to come.