Inheritance Tax on Farmland: Government Backs Down After Farmer Protests
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The government has significantly revised its plans to impose a 20% inheritance tax on agricultural assets, raising the threshold from £1 million to £2.5 million following sustained pressure from farmers and concerns within the Labour party.
The initial proposal, announced at last year’s Budget, aimed to tax inherited agricultural estates exceeding £1 million starting in April 2026. However, months of protests and internal dissent have prompted a major policy shift. Environment Secretary Emma Reynolds stated, “We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms.” She further emphasized that “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.”
Farmers Welcome, But Concerns Remain
The revised threshold has been met with cautious optimism from the agricultural sector. Tom Bradshaw, head of the National Farmers’ Union, told BBC Radio 5 Live that the change “takes out many family farms from the eye of a pernicious storm.” However, industry leaders warn that the issue is far from resolved.
Gavin Lane, President of the Country Land and Business Association, acknowledged the government’s responsiveness, saying, “The government deserves credit for recognizing the flaws in the original policy and changing course.” But he cautioned that the new threshold “only limits the damage – it doesn’t eradicate it entirely.” Lane explained that many family businesses, despite operating on tight margins, possess enough expensive machinery and land to exceed the £2.5 million valuation, leaving them still vulnerable to the tax.
Political Fallout and Future Battles
The initial proposal sparked significant political turmoil. For 14 months, farmers staged regular protests outside Parliament, voicing their opposition to the tax. Within the Labour party, a dozen backbenchers abstained from a recent parliamentary vote on the plan, and one MP, Markus Campbell-Savours, voted against it. As a consequence of his dissent, Campbell-Savours was suspended from the party and now sits as an independent MP.
The Conservative party has signaled its intention to continue challenging the tax. Kemi Badenoch, the Conservative leader, posted on social media, “This fight isn’t finished. Other family businesses are still affected by Labour’s tax raid, and we will keep pushing until the tax is lifted from them too.”
Liberal Democrat spokesperson Tim Farron MP condemned the government’s handling of the issue, stating, “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.” He pledged that the Liberal Democrats would propose amendments in the new year to abolish the tax altogether.
The revised inheritance tax threshold represents a significant concession by the government, but the debate surrounding the taxation of agricultural assets is likely to continue, with ongoing pressure from both sides of the political spectrum.
