The UK government has announced a major concession on its inheritance tax proposals affecting farms, following intense criticism from the farming community.
The policy, initially unveiled in last year’s budget, faced fierce opposition from farmers who warned it would prevent them from passing their land to the next generation. The original plan would have imposed inheritance tax on farms valued over £1m.
The new rules, scheduled to take effect in April 2026, now raise the threshold from £1m to £2.5m. This means that spouses or civil partners can pass on up to £5m in qualifying agricultural or business assets between them before inheritance tax applies, in addition to existing allowances.
In a Commons committee hearing last week, Prime Minister Keir Starmer acknowledged the severity of the issue, revealing that some farmers with terminal illnesses had considered taking their own lives to avoid the tax.
A government statement said:
“The government has today announced that the level of the agricultural and business property reliefs threshold will be increased from £1m to £2.5m when it is introduced in April 2026. This allows spouses or civil partners to pass on up to £5m in qualifying agricultural or business assets between them before paying inheritance tax, on top of existing allowances.
Following the reforms to agricultural and business property reliefs announced at Budget 2024, the government has listened to concerns of the farming community and businesses about the reforms.
Having carefully considered this feedback, the government is going further to protect more farms and businesses, while maintaining the core principle that the most valuable agricultural and business assets should not receive unlimited relief. The change will be introduced to the Finance Bill in January and will apply from 6 April.”
The move has been welcomed by farmers and agricultural organisations, who argued that the previous £1m threshold would have forced many to sell or break up their farms, threatening generational continuity and rural livelihoods.
