Ministers relaxes death duty proposal for family farms

Treasury intentions to impose a duty on passed-down farming assets have been significantly revised, with the planned threshold being raised from £1m to £2.5m.

This rethink is a response to months of demonstrations by agricultural workers and disquiet from some Labour MPs.

Original Plan

At last year's financial statement, the government announced they would start applying a 20% tax on passed-on agricultural assets worth more than £1m from the 2026 tax year.

In her maiden Budget in 2024, Chancellor Rachel Reeves declared she would be reversing the tax relief on farmland that had been in place since the 1980s.

The move would have seen inherited farmland worth over £1m taxed at 20%, 50% of the standard inheritance tax rate, raising an projected £520m per year by 2029.

Government Statement

"We have paid close attention to family farms across the country and we are introducing modifications today to protect more ordinary family farms."

"It's only fair that wealthier landowners pay a greater share, while we support the farms and trading businesses that are the lifeblood of Britain's farming areas."

Farming Response

The Head of the National Farmers' Union praised the revision, stating it "takes out many family farms from the threat of damaging policy."

The Spokesperson of the Country Land and Business Association noted: "The government should be commended for identifying the shortcomings in the first proposal and adjusting its approach."

He continued, "However, this concession only reduces the harm - it doesn't eradicate it totally. Many family businesses will own enough expensive machinery and land to be valued above the limit, yet still operate on such thin returns that this charge remains unaffordable."

Parliamentary Reaction

In the year-plus since the first announcement, there have been frequent protests by farmers near Parliament.

Some Labour MPs in farming constituencies have also voiced unease. At a recent parliamentary vote on the plan, a several backbenchers withheld their support and one voted against.

The opposition leader posted on a social platform: "This battle isn't done. Other family businesses are still affected by Labour's tax grab, and we will keep campaigning until the tax is removed from them too."

A opposition party spokesperson said: "It is totally unforgivable that family farmers have been put through over a year of uncertainty and anguish since the government first floated these plans."

The political party spokesperson said: "This calculated concession - whilst a step forward - does little to address the year of anxiety that farmers have faced... with British agriculture hanging by a thread, the government must go further and scrap this damaging farms tax."

Revised Details

The government had maintained that the change would help smaller farms while stopping the very rich from buying farmland as a way to reduce tax.

Yet, it has now retreated from the initial plan increasing the tax-free amount to £2.5m.

Coupled with an allowance which allows farmers to pass on assets to their husbands or wives free of inheritance tax, this new revised threshold means a partnership could pass on up to £5m in eligible assets.