Treasury intentions to impose a duty on inherited farmland have been significantly revised, with the proposed threshold being raised from £1m to £2.5m.
This concession is a response to months of protests by agricultural workers and disquiet from some Labour parliamentarians.
Original Plan
At last year's financial statement, the government said they would start imposing a one-fifth levy on inherited farming businesses worth more than £1m from the 2026 tax year.
In her initial fiscal event in 2024, Chancellor Rachel Reeves declared she would be reversing the exemption on agricultural assets that had been in place since the 1980s.
The policy would have seen inherited agricultural assets worth over £1m subject to a levy at 20%, 50% of the standard inheritance tax rate, yielding an projected £520m each year by 2029.
Government Statement
"We have paid close attention to the farming community across the country and we are adjusting our policy today to protect more everyday family farms."
"It's only just that larger estates shoulder more of the burden, while we back the agricultural enterprises that are the backbone of Britain's farming areas."
Industry Reaction
The Head of the National Farmers' Union welcomed the change, saying it "takes out many family farms from the eye of harmful tax."
The President of the Country Land and Business Association said: "The government deserves credit for acknowledging the shortcomings in the initial plan and adjusting its approach."
He added, "However, this announcement only mitigates the impact - it doesn't remove it entirely. Many family businesses will own enough costly assets and land to be valued above the threshold, yet still operate on such small returns that this tax burden remains prohibitive."
Parliamentary Reaction
In the year-plus since the first announcement, there have been frequent protests by farmers close to Parliament.
Some backbenchers in the countryside have also voiced unease. At a recent division in the Commons on the plan, a dozen backbenchers abstained and one voted against.
The Conservative leader commented on social media: "This fight isn't finished. Other family businesses are still impacted by Labour's levy, and we will keep pushing until the tax is lifted from them too."
A opposition party MP argued: "It is totally unforgivable that family farmers have been put through over a year of uncertainty and stress since the government first announced these changes."
The political party deputy leader said: "This calculated concession - whilst an improvement - does little to address the year of concern that farmers have faced... with British agriculture under severe pressure, the government must go further and scrap this callous farms tax."
Revised Details
The government had maintained that the change would protect smaller farms while deterring the very rich from buying farmland as a way to reduce tax.
However, it has now retreated from the initial plan raising the tax-free amount to £2.5m.
Combined with an allowance which allows farmers to pass on assets to their husbands or wives free of inheritance tax, this new government concession means a partnership could pass on up to £5m in eligible assets.
