Ministerial plans to impose a duty on inherited agricultural land have been watered down, with the proposed threshold increasing from £1m to £2.5m.
This climbdown follows months of demonstrations by agricultural workers and unease from some Labour backbenchers.
Background
At last year's Budget, the government said they would start imposing a one-fifth levy on inherited agricultural assets worth more than £1m from the 2026 tax year.
In her initial fiscal event in 2024, Chancellor Rachel Reeves stated she would be reversing the favourable treatment on agricultural assets that had been in place since the 1980s.
The measure would have seen passed-down agricultural assets worth over £1m taxed at 20%, 50% of the standard inheritance tax rate, raising an projected £520m per year by 2029.
Government Statement
"We have paid close attention to family farms across the country and we are adjusting our policy today to shield more ordinary family farms."
"It's only just that wealthier landowners shoulder more of the burden, while we back the farms and trading businesses that are the lifeblood of Britain's farming areas."
Industry Reaction
The Leader of the National Farmers' Union welcomed the revision, commenting it "exempts many family farms from the eye of harmful storm."
The President of the Country Land and Business Association remarked: "The government deserves credit for acknowledging the flaws in the initial plan and changing course."
He went on to say, "That said, this announcement only mitigates the impact - it doesn't remove it completely. Many family businesses will own enough high-value equipment and land to be priced above the limit, yet still operate on such small returns that this levy remains unaffordable."
Political Fallout
In the period since the initial proposal, there have been regular rallies by farmers outside Parliament.
Some Labour MPs in rural areas have also expressed concern. At a recent legislative vote on the plan, a twelve backbenchers abstained and one opposed the measure.
The opposition leader said on a social platform: "This battle isn't over. Other family businesses are still harmed by Labour's tax raid, and we will keep pushing until the tax is removed from them too."
A Liberal Democrat MP stated: "It is utterly inexcusable that family farmers have been put through over a year of uncertainty and stress since the government first proposed these changes."
The Reform UK spokesperson stated: "This last-minute U-turn - whilst a step forward - does little to address the year of concern that farmers have faced... with British agriculture hanging by a thread, the government must go further and abolish this damaging agricultural levy."
Updated Policy
The government had argued that the policy would safeguard smaller farms while deterring the very rich from buying farmland as a tax loophole.
Yet, it has now rowed back from the original proposal raising the tax-free amount to £2.5m.
Alongside an provision which allows farmers to pass on assets to their partners tax-free, this new policy adjustment means a couple could pass on up to £5m in qualifying assets.
