UK Government waters down inheritance tax plans for farmers after backlash

The UK Government will raise the inheritance tax relief threshold for farmers from £1 million to £2.5 million in a climbdown following months of protest.

The change to the reforms initially unveiled at Labour’s first Budget last year comes after ministers “listened to concerns” of the farming community and businesses, according to the Department for Environment, Food and Rural Affairs (Defra).

Farmer Henry Graham protests in Westminster over the changes to inheritance tax | PA

Baroness Minette Batters, the former head of the National Farmers’ Union (NFU) who led an independent review for the Government, warned that the proposals had led to farmers contemplating suicide to avoid the tax changes.

The higher threshold, which will take effect in April, will allow spouses or civil partners to pass on up to £5 million in qualifying agricultural or business assets between them before paying inheritance tax – on top of existing allowances, Defra said.

UK 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 £1 million to £2.5 million which means couples with estates of up to £5 million 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.”

‘Huge relief’ for farmers

NFU president Tom 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.”

The Liberal Democrats have said the uncertainty farmers have faced over inheritance tax changes has been “utterly inexcusable” and demanded the UK Government scrap “this unfair tax in full”.

The party’s rural affairs spokesman, Tim Farron MP, said: “It is utterly inexcusable that family farmers have been put through over a year of uncertainty and anguish since the Government first announced these changes.

“Liberal Democrats were the first to call out and oppose the unfair family farm tax in last years Budget and we have been proud to stand alongside our farming communities to campaign against it ever since.

“This concession has been hard won, and I am so grateful to all the farmers who have fought tirelessly to achieve this.

“This is about justice and security – if we undermine British farming then we also undermine our ability to provide us with the food we need to keep us secure in an uncertain world.

“Yet many family farms will still find themselves financially crippled and barely making the minimum wage.

“We demand that the Government scraps this unfair tax in full and if they refuse to, Liberal Democrats will submit amendments in the new year to bring it down.”