Labour U-turns on inheritance tax raid for farmers in major watering down on plans after rural backlash
The Agricultural and Business Property Reliefs threshold will be increased from £1m to £2.5m when it is introduced in April 2026.
Labour will raise the inheritance tax relief threshold for farmers in a major climbdown following backlash from rural communities.
Listen to this article
The government has today announced that the level of the Agricultural and Business Property Reliefs threshold will be increased from £1m to £2.5m when it is introduced in April 2026.
This allows spouses or civil partners to pass on up to £5m in qualifying agricultural or business assets between them before paying inheritance tax, on top of existing allowances.
The government said it has listened to concerns of the farming community and businesses about the reforms to Agricultural and Business Property Reliefs announced at Budget 2024.
Raising the threshold will significantly reduce the number of farms and business owners facing higher inheritance tax bills under the reforms, ensuring that only the largest estates are affected, the government has said.
Environment Secretary Emma Reynolds said: "Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming.
"We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms.
"We are increasing the individual threshold from £1m to £2.5m which means couples with estates of up to £5m will now pay no inheritance tax on their estates.
"It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities."
Earlier this month some Labour MPs pleaded with the government to review its plans to impose inheritance tax on farmers, as the Commons voted in support of the proposal.
Markus Campbell-Savours, Labour MP for Penrith and Solway, rebelled and voted against Chancellor Rachel Reeves’s changes to the tax, telling the Commons he had to do all he could for his community.
Backbenchers argued most farmers are “not wealthy land barons”, and the the measure failed to tackle “abuse by the celebrities and the billionaires” who buy farmland to avoid paying a full inheritance tax bill.
Before the Budget vote, the National Farming Union (NFU) called on Labour MPs to abstain from the vote and “show that they truly back the working people of the countryside”.
NFU president Tom Bradshaw said: “Without change, the family farm tax will trap the most vulnerable members of our community, the elderly and terminally ill, with no ability to plan. It’s inhumane and it’s cruel.”
Following today's announcement, NFU president Bradshaw said the announcement would be a “huge relief to many” and would “greatly” reduce the tax burden for many family farms.
He said: “Changes to Agriculture Property Relief (APR) and Business Property Relief (BPR) announced in last year’s budget came as a huge shock to the farming community. Until that moment, the best tax planning advice was to hold on to your farm until death and pass it on to the next generation who could continue to run a viable farming, food producing business.
“The original changes to APR and BPR, contained within the Finance Bill, resulted in a pernicious and cruel tax, trapping the most elderly and vulnerable people and their families in the eye of the storm. The NFU and its members have stood strong for what we believed in.
“I am thankful common sense has prevailed and government has listened.
“I have had two very constructive meetings with Prime Minister Sir Keir Starmer and dozens of conversations with Defra Secretary of State Emma Reynolds. She has played a key role underlining the human impact of this tax.
“These conversations have led to today’s changes which were so desperately needed.
“From the start, the Government said it was trying to protect the family farm and the change announced today brings this much closer to reality for many.”