In a significant policy reversal, the Government has announced it will substantially increase the inheritance tax relief threshold for farmers following months of intense protest from the agricultural community.
A Major Concession After Farmer Protests
The Department for Environment, Food and Rural Affairs (Defra) confirmed on Tuesday that the individual threshold for Agricultural Property Relief (APR) and Business Property Relief (BPR) will rise from £1 million to £2.5 million. This change, a direct response to the outcry over reforms first outlined in Labour's debut Budget last year, will come into force on 6 April 2025.
The original Treasury plans, designed to generate revenue, would have seen the full 100% relief restricted to the first £1 million of property. This meant farmers faced an effective tax rate of up to 20% on assets above that level when passing businesses to the next generation. The proposals triggered tractor protests outside Parliament and fierce criticism from Labour MPs representing rural constituencies.
Impact on Family Farms and Political Fallout
The heightened threshold means spouses or civil partners will be able to pass on up to £5 million in qualifying agricultural or business assets between them before incurring inheritance tax, on top of existing allowances. A 50% relief will apply to assets above this new ceiling. The Government estimates this adjustment will reduce the number of estates facing higher bills from around 2,000 under the original plan to approximately 1,100, affecting only the largest farms.
The controversy had profound personal consequences. Baroness Minette Batters, the former National Farmers' Union (NFU) president who led an independent review, warned that the initial plans had led some farmers to contemplate suicide to avoid the tax changes. The political strain was also evident, with Penrith and Solway MP Markus Campbell-Savours losing the Labour whip earlier this month for voting against his own party's proposals.
Reaction from Ministers and Industry
Announcing the climbdown, 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... 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."
NFU president Tom Bradshaw welcomed the announcement as a "huge relief to many," saying it would greatly reduce the tax burden. He expressed gratitude that "common sense has prevailed" after what he described as a "pernicious and cruel" initial proposal.
Opposition Demands Further Action
Despite the concession, opposition parties argued the Government's rowback does not go far enough. Tory leader Kemi Badenoch labelled it a "huge U-turn" on "cruel, immoral" plans. Liberal Democrat Tim Farron called for the tax to be scrapped in full, while Reform UK's Richard Tice argued that "many family farms will still face crippling bills" and demanded the abolition of what he termed a "callous farms tax."
The move marks a notable retreat for Prime Minister Sir Keir Starmer's administration, which had previously defended the reform as "sensible." The episode underscores the potent political force of the UK's farming lobby and the sensitive balance of tax policy in the rural economy.
