Farming Industry Divided Over Labour’s Inheritance Tax Reform
The UK’s farming sector is bracing for major financial changes as Labour’s inheritance tax reforms come into effect on 6 April 2026. The government’s decision to cap Agricultural Property Relief (APR) at £1 million per person with only 20% relief available on assets above that threshold has ignited fierce debate over the future of family farming.
Richard Pennycook, chairman of poultry giant 2Sisters, which supplies Tesco, Sainsbury’s and Marks & Spencer, warned that the policy could push “thousands of British farmers to financial ruin.” He described the reforms as “crazy,” arguing they risk driving families away from agriculture at a time when domestic food security should be prioritised.
The Treasury defends the policy as a measure aimed at the wealthiest estates, with claims that most farming families will not be affected. However, industry leaders, opposition MPs, and farming unions argue that even a small number of forced farm sales could have wide repercussions for rural communities and food supply chains.
What the Tax Reform Involves
The changes, announced in Labour’s Autumn 2024 Budget, will cap APR and Business Property Relief (BPR) at £1 million per person. Any qualifying agricultural assets above that amount will only receive 20% relief, compared with the current 100% exemption. Importantly, the government has introduced a 10-year, interest-free payment option to ease the immediate cash flow impact for heirs.
For married couples, in certain circumstances, up to £3 million of agricultural assets may remain protected. According to the Treasury, the policy is expected to mainly affect the wealthiest 500 estates annually, leaving most family farms untouched. For families looking at broader tax strategies alongside inheritance planning, investment schemes like the EIS can provide valuable reliefs. Learn more in our guide on how to use EIS to reduce Capital Gains Tax.
Pennycook’s Concerns for Farmers
Richard Pennycook, chair of 2Sisters, has become one of the most outspoken critics of the reform. He argues that farming is already under pressure from high costs, labour shortages, and market volatility, and that inheritance tax changes could be the final straw for some families.
“There will inevitably be anxious conversations taking place around the kitchen table at a family level at thousands of farms up and down the country,” he said, warning that the reforms risk accelerating a wave of exits from the industry.
Government’s Position and Pushback Against ‘Misinformation’
The government insists the reforms are fair and necessary to prevent very wealthy landowners from exploiting unlimited relief. Ministers argue that the vast majority of farms will not see any change, and that scaremongering about “tens of thousands” of farms being affected amounts to “crazy misinformation.”
Officials also stress that food security remains a top priority, pointing to broader support packages for farming and assurances that most family-run businesses will continue to benefit from relief. While HMRC takes a tough stance on misuse of reliefs, ordinary taxpayers sometimes face penalties for genuine mistakes. Our guide on appealing a Self Assessment penalty explains how to challenge unfair charges.
Farmers’ Broader Struggles
Even before the reforms take effect, British farmers are struggling with rising input costs, volatile weather patterns, and labour shortages. Earlier in 2025, National Insurance changes increased wage bills across the sector, adding to financial pressures.
While inheritance tax reform has not yet come into force, farming groups argue that layering new burdens onto an already fragile sector could tip some families into considering selling land or exiting agriculture altogether.
Food Security Concerns
Critics like Pennycook also highlight the contradiction between the government’s stated commitment to domestic food production and policies that risk discouraging investment in farming. “You would think the Government would take food security really seriously but the inheritance tax changes play against that,” he said.
Industry leaders warn that any loss of family-owned farms could pave the way for further consolidation by large agribusinesses, potentially undermining diversity and resilience in the UK’s food supply.
Uncertain Outcomes Ahead
Independent experts caution that while the reforms are targeted at a small number of estates, the effects could ripple more widely. Rural property markets may face increased pressure if heirs are forced to sell land, and family farms may have to restructure to stay within relief thresholds.
The full impact will only become clear after April 2026, but with trust already strained between government and the farming sector, Labour faces an uphill battle to convince rural communities that the reforms strike the right balance between fairness and sustainability.
Final Summary
Farm tax reform divides industry
Labour’s inheritance tax reforms, effective April 2026, mark one of the most contentious agricultural policy shifts in recent years. By capping APR and BPR relief at £1 million per person, the government aims to curb abuse by wealthy estates while preserving support for most family-run farms. Treasury officials insist only a small minority will be affected, but industry leaders warn the psychological and financial pressures could be far more significant than the numbers suggest.
Richard Pennycook of 2Sisters has been at the forefront of opposition, calling the reforms “crazy” and warning they could erode both family livelihoods and national food security. While the government accuses critics of spreading misinformation, farming unions argue that even a handful of forced land sales could have lasting consequences for rural communities. For official details on Agricultural and Business Property Relief, see HMRC’s guidance on Inheritance Tax Reliefs.
Ultimately, the policy highlights the delicate balance between ensuring tax fairness and safeguarding the future of British farming. How Labour manages that tension will define its relationship with the countryside for years to come.
