Ministers have increased the threshold for inheriting farmland from £1m to £2.5m following months of pressure from campaigners and MPs. The change, announced just before Christmas, will take effect from April.
The original plan, announced in Rachel Reeves' first budget, would have taxed agricultural assets above £1m at a 20% rate, reversing relief that had existed since the 1980s. Critics labelled it a 'family farm tax' and sparked protests across the UK.
The reversal follows efforts from Labour MPs who argued privately against the tax, including the prime minister's parliamentary private secretary. Sir Keir Starmer conceded at a select committee hearing that he had been told of terminally ill farmers planning to kill themselves to avoid the tax.
The Department for Environment, Food and Rural Affairs said it had listened to concerns. The change means 85% of farms will not pay inheritance tax, up from 75%, and the number of affected estates next year will fall from 375 to 185. It will cost the exchequer £130m.
Environment Secretary Emma Reynolds said the government had listened to farmers and was protecting ordinary family farms. NFU president Tom Bradshaw welcomed the change as a 'huge relief'. Conservative leader Kemi Badenoch claimed it as a win for their campaign against the tax.
