The Labour government will raise the inheritance tax relief threshold for farms in another dramatic U-turn following a year of backlash from rural communities.
On Tuesday, the Treasury and Department for Food and Rural Affairs said it would increase the Agricultural and Business Property Reliefs threshold to £2.5m from £1m when it is introduced in April 2026.
This will allow spouses or civil partners to pass on estates of up to £5m without paying inheritance tax on top of existing allowances.
The government said it had “carefully considered” feedback and was “going further to protect more farms and businesses”.
It now expects the changes will cut the number of family estates eligible to pay higher inheritance tax to 1,100 from 2,000 under the original proposals.
James Cook, partner in the private client team at law firm Russell-Cooke, said: “This U‑turn may calm nerves in the short term, but it doesn’t fix the underlying problem that farmers and business owners have spent years, if not generations, planning around one set of rules, only to see the Government change course again.”
He added the increase to relief “will help many estates on paper” but warned it would fail to “undo the disruption already caused”.
“Investment decisions have been delayed, succession plans have been rewritten, and confidence in long‑term policymaking has taken another hit. Farmers and businesses do not just need higher thresholds, they need certainty and stability,” he added.
The reforms around Agricultural Property Relief (APR) were introduced in Chancellor Rachel Reeves’ first Autumn Budget and sparked countless protests in Westminster.
Starmer confronted by inheritance tax raid consequences
During a session with a panel of senior parliamentarians on the liaison committee earlier this month, Sir Keir Starmer suggested he was aware that some terminally ill farmers were planning to take their own lives to avoid their farm being hit by the changes in April.
Cat Smith, Labour chairwoman of the Commons procedure committee, asked Starmer whether he was “aware that some farmers who have a terminal diagnosis now are actively planning to expedite their own deaths”.
The Prime Minister responded: “I’ve had discussions with a number of individuals who have drawn all manner of things to my attention.”
A poll of family business owners ahead of the November Budget found nearly two thirds of the UK’s 4.8m family businesses were worried about their future prospects after a succession of wage and tax hikes left many scrambling to plug a hole in their balance sheet.
Emma Reynolds, the Environment Secretary, said: “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.
“It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities.”