Ministers revises IHT policy for farmland

Government intentions to levy a charge on passed-down farming assets have been significantly revised, with the planned exemption limit increasing from £1m to £2.5m.

This climbdown is a response to months of campaigns by the farming community and concern from some Labour MPs.

Initial Announcement

At last year's financial statement, the Chancellor said they would start introducing a inheritance charge on inherited farming businesses worth more than £1m from the 2026 tax year.

In her first fiscal event in 2024, Finance Minister Rachel Reeves announced she would be ending the favourable treatment on agricultural assets that had been in place since the 1980s.

The policy would have seen inherited farmland worth over £1m subject to a levy at 20%, 50% of the standard inheritance tax rate, raising an estimated £520m annually by 2029.

Official Announcement

"We have paid close attention to family farms across the country and we are adjusting our policy today to safeguard more typical family farms."

"It's only right that wealthier landowners shoulder more of the burden, while we support the farms and trading businesses that are the backbone of Britain's farming areas."

Farming Response

The Head of the National Farmers' Union applauded the revision, commenting it "exempts many family farms from the threat of damaging storm."

The President of the Country Land and Business Association remarked: "The government should be commended for recognising the problems in the first proposal and adjusting its approach."

He added, "That said, this announcement only reduces the harm - it doesn't remove it completely. Many family businesses will own enough high-value equipment and land to be valued above the limit, yet still operate on such small profit margins that this tax burden remains prohibitive."

Parliamentary Reaction

In the 14 months since the original plan, there have been ongoing protests by farmers close to Parliament.

Some backbenchers in rural areas have also voiced unease. At a recent parliamentary vote on the plan, a twelve backbenchers did not vote and one opposed the measure.

The opposition leader said on social media: "This campaign isn't done. Other family businesses are still harmed by Labour's levy, and we will keep fighting until the tax is removed from them too."

A Liberal Democrat spokesperson said: "It is completely unacceptable that family farmers have been put through over a year of uncertainty and stress since the government first announced these plans."

The political party spokesperson remarked: "This calculated climbdown - whilst better than nothing - does little to address the year of worry that farmers have faced... with British agriculture under severe pressure, the government must go further and scrap this unfair agricultural levy."

Revised Details

The government had contended that the original measure would help smaller farms while deterring the very rich from buying farmland as a tax avoidance scheme.

Yet, it has now retreated from the first announcement lifting the threshold level to £2.5m.

Alongside an provision which allows farmers to pass on assets to their spouses without incurring tax, this new government concession means a married pair could pass on up to £5m in applicable assets.