UK Government Reverses Farm Inheritance Tax Rules After Protests — Relief Threshold Raised

The UK government has announced a significant change to its proposed inheritance tax reforms affecting family farms, raising the threshold at which agricultural assets become liable for tax. The decision follows months of protests and political pressure from farmers and rural communities who warned the original plans could threaten the future of multi-generational farms.

Ministers said the revised policy is intended to protect ordinary family farms while maintaining fairness within the tax system. The move represents a partial reversal of measures set out in last year's Autumn Budget and marks one of the most notable policy adjustments made in response to grassroots opposition.

While the increase has been broadly welcomed by farming groups, critics argue the reforms still fall short of addressing long-term concerns about farm succession, rising land values and the sustainability of the agricultural sector.

Tax Threshold Significantly Raised

Under the original proposals, changes to Agricultural Property Relief and Business Property Relief would have limited 100 per cent inheritance tax relief on qualifying agricultural assets to the first £1 million of value (approximately $1.3 million). Any assets above that level would have been subject to inheritance tax, a move that farmers said could force land sales to meet tax bills.

Following the policy review, the government has increased the threshold for full relief to £2.5 million (approximately $3.3 million) per individual. Couples will be able to combine allowances, meaning up to £5 million (approximately $6.6 million) in qualifying farm and business assets can be passed on without inheritance tax. Assets above that level will continue to receive 50 per cent relief.

The revised rules are due to take effect from April 2026. Officials estimate that the changes will significantly reduce the number of agricultural estates affected by higher inheritance tax liabilities.

Protests and Political Pressure

The reversal follows sustained protests by farmers across the UK, including tractor convoys through central London and demonstrations outside Parliament. Farming organisations warned that the original proposals failed to reflect the reality of modern agriculture, where land values have risen sharply while profit margins remain tight.

Rural MPs from several parties raised concerns in the Commons, arguing that the reforms risked undermining food security and discouraging younger generations from remaining in farming. Some government backbenchers also expressed unease, highlighting the political sensitivity of inheritance tax and rural policy.

The protests placed growing pressure on ministers to reconsider the plans, particularly as the issue gained national attention.

Reaction From Government and Farming Groups

The Environment Secretary said the government had listened to concerns raised by farmers and had sought to strike a balance between protecting family farms and ensuring that larger estates contribute appropriately. She said the revised threshold would provide greater certainty for succession planning while maintaining the integrity of the tax system.

However, some farming groups and opposition parties said the reforms did not go far enough. They argued that inheritance tax on farmland remains a barrier to long-term investment and called for a complete exemption for agricultural assets.

Wider Impact and Next Steps

Inheritance tax relief for farms has long been contentious, particularly as land values have outpaced agricultural income. Analysts note that policies based on market value rather than productive use can create financial strain during generational transfers.

While the revised threshold is expected to reduce the immediate impact on most family farms, debate continues over whether further reform is needed. For now, the government's decision has eased tensions, but questions remain about how the tax system should support the future of British farming.