The recent decision by the Government to retract plans for extending inheritance tax to farms has been met with relief from farmers who were concerned about the impact on passing on their farms to their children. This change in policy comes after significant opposition from farmers and some Labour backbenchers.
During last year’s Budget announcement, it was revealed that a 20% tax would be imposed on inherited agricultural assets exceeding £1 million starting from April 2026. However, in response to the feedback received, the Government has revised this threshold to £2.5 million, with the new regulations set to take effect in April 2026.
The adjustment in the threshold is expected to reduce the number of farms subject to higher inheritance tax payments, ensuring that only the largest estates will be affected.
Environment Secretary, Emma Reynolds, emphasized the importance of supporting British farming, stating, “Farmers play a vital role in our food security and environmental conservation efforts. We have taken into account the concerns of farmers nationwide and are implementing changes to safeguard more typical family farms.”
She added, “By raising the individual threshold to £2.5 million, couples with estates valued up to £5 million will no longer be liable for inheritance tax. This shift ensures that larger estates bear a greater tax burden, while we continue to support the farms and businesses that form the backbone of rural communities in Britain.”
NFU president, Tom Bradshaw, expressed gratitude for the Government’s decision, stating that it would provide significant relief to many family farms by reducing the tax obligations they face.
The Liberal Democrats have called for the complete elimination of this “unfair tax,” citing concerns that many family farms may still struggle financially, potentially earning only minimum wage.
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