The UK Government has announced a major revision to its approach to the taxation of inherited farmland, following sustained criticism and significant protests from the farming community. The decision lifts the planned inheritance tax threshold for agricultural assets from £1 million to £2.5 million, set to take effect in April 2026.
The move responds to widespread concerns that the initial plan would have jeopardised the ability of many farming families to pass their businesses to the next generation, potentially affecting the viability of smaller family-run farms across the country.
Policy background
The original proposal, disclosed in the previous year’s Budget, intended to impose a 20% inheritance tax on agricultural estates valued over £1 million. This plan would have impacted a considerable number of farming families, who argued it placed their operations at risk and might result in the forced sale of farmland to meet tax liabilities.
Under the revised scheme, the threshold has been lifted to £2.5 million for individual estates. For couples, this adjustment means the joint estate can now be worth up to £5 million before incurring inheritance tax on farm assets.
The change, effective from April 2026, is aimed at protecting the continuity of most family farming operations.
Farming sector response
The farming sector had mounted a robust campaign against the initial threshold, staging multiple demonstrations and lobbying Parliament. Agricultural leaders warned that the lower limit would have prompted a wave of farm sales, reducing the number of family-owned agricultural businesses in the UK.
Farmers’ representatives highlighted the unique position of the sector, where land and assets are often held across generations as part of sustainable food production.
Many farmers argued the original proposal ignored the fact that agricultural estates generally include assets vital to food security and rural economies.
Government’s revised approach
Environment Secretary Emma Reynolds stated, “Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming.
We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms.” Reynolds further asserted that the revised thresholds strike a balance between asking larger estates to contribute more and safeguarding the interests of the majority of family-owned farms and rural businesses.
The Government maintains that larger estates will still face inheritance tax under the new regime.
Political and industry reactions
The National Farmers Union (NFU) welcomed the announcement, describing the upward revision as a major relief. NFU President Tom Bradshaw said, “Changes to Agriculture Property Relief (APR) and Business Property Relief (BPR) announced in last year’s Budget came as a huge shock to the farming community.
The original changes… resulted in a pernicious and cruel tax, trapping the most elderly and vulnerable people and their families in the eye of the storm. I am thankful common sense has prevailed and government has listened.”
The union emphasised that the higher threshold would significantly reduce the tax burden on family farms, allowing more families to continue their operations uninterrupted.
Liberal Democrat stance
Despite the Government’s revised policy, the Liberal Democrats criticised the measure and called for the tax to be scrapped entirely.
The party argued that even with increased thresholds, “many family farms will still find themselves financially crippled and barely making the minimum wage,” according to statements attributed to party spokespeople.
Final Summary
The Government’s decision to increase the inheritance tax threshold on farms to £2.5 million has been broadly welcomed by the farming industry and is seen as a victory for campaigners who warned about the risk to family farm succession.
While larger estates remain affected, the change will substantially decrease the number of farming families required to pay inheritance tax under the forthcoming rules. However, political debate continues over the fairness and scope of the policy, with calls for further reform.
For those seeking to monitor tax policy developments and succession planning in the UK, the Pie platform provides timely updates and expert resources.
